Opt-Outs Running High in OregonSaves Program

By ASPPA Net Staff • January 31, 2018 • 0 Comments
The nation’s first state-run retirement plan for private sector workers is picking up steam — but the opt-out rates are a bit of an eye-opener.

As of Dec. 1, after five months of the pilot phase, the combined savings of 1,162 participating workers was $255,721.99. Signups began last fall for the first-wave participants — workers at businesses that employ at least 100 people. OregonSaves will expand statewide in waves, starting this year.

However, as of Jan. 24, about 20% of employees had opted out of opening an IRA, according to Bloomberg Law, citing numbers from OregonSaves. That’s better than the earlier results; the program’s first wave (11 employers) saw an opt-out rate of 25%, and the second — comprised of 43 employers (and about 2,500 eligible workers — experienced a 30% opt-out rate as of Dec. 4, according to the OregonSaves Annual Report to the Legislature.

That’s at least double — and by most estimates three or four times as high as — the opt-out rates from typical workplace retirement plans, which often have the support of an employer match, education materials and advisors to encourage participation. On the other hand, those who are now saving via the program are doubtless better off than they were before they were enrolled. And AARP estimates that the state of Oregon could benefit from participation as well, recently reporting that if low-income retirees can save enough to increase their retirement income by an additional $1,000 per year, the state could spend almost $99 billion less on public assistance during the period 2018-2032.

The OregonSaves program auto-enrolls participants at 5%, while the typical private sector auto-enrollment program still starts at 3% (though surveys suggest a movement to higher defaults) with an auto-escalation provision to 10%. The post-tax deferrals are defaulted into a capital preservation fund for the first $1,000 and then into a target-date framework. Fees for participants are capped at about 1% annually.

During the pilot phase of the program, which included 53 registered employers, 1,880 Oregonians saved about $260,000 for retirement, according to the program’s annual report to the state legislature. The average contribution was $54.35.

Looking Ahead

OregonSaves will gradually be rolled out to small employers and the self-employed. The Oregon Retirement Savings Board will be following this schedule:

  • 50 to 99 employees: May 15, 2018

  • 20 to 49 employees: Dec. 15, 2018

  • Self-employed: December 2018

  • 10 to 19 employees: May 15, 2019

  • 5 to 9 employees: Nov. 15, 2019

  • 4 or fewer employees: May 15, 2020

Auto-escalation for participants will begin on Jan. 1, 2019.