Innovations Can Promote Retirement Savings

On Oct. 28, John Scott, director of The Pew Charitable Trusts’ retirement savings project, testified at a U.S. Senate Special Committee on Aging hearing, “A Financially Secure Future: Building a Stronger Retirement System for All Americans.” Scott explained how gaps in retirement plan coverage, especially among small employers, threaten workers’ retirement security; raise costs for federal, state, and local governments; lead to lower tax revenue and employment; and pose other risks for the economy. Scott then shared some promising ideas and initiatives to address these challenges.

In particular, Scott discussed states’ rapid adoption of automatic enrollment payroll deduction IRA (auto-IRA) programs, which allow private-sector workers who do not have a workplace retirement plan to regularly save via payroll contributions. Oregon was the first state to launch an auto-IRA program, called OregonSaves, and as of Sept. 30, 2021, 17,021 employers had registered to facilitate the program. In total, 68% of eligible workers in the state have enrolled, each contributing, on average, about $143 a month, for an average savings rate of 5.5%. Nine more states—California, Colorado, Connecticut, Illinois, Maine, Maryland, New Jersey, New York, and Virginia—are in various stages of implementing auto-IRA programs and, in his testimony, Scott outlined how these and other emerging strategies could be effective in increasing coverage and participation.