"My name is
"Before I was elected State Treasurer, I served in the state legislature. In 2015, I co-sponsored the legislation that led to the creation of the Oregon Retirement Savings Program, also known as OregonSaves. The Oregon State Treasury is tasked with implementing OregonSaves, and my experience with OregonSaves is why I am here to testify before you today.
"We created the first-in-the-nation OregonSaves program in response to our nation's retirement savings crisis. According to the
"That's why everyone should be happy to see the efforts of
"The program is working. I am pleased to report that OregonSaves is already a success, and it is still just getting started. Tens of thousands of people are already participating and most of these Oregonians had never saved before. We have eclipsed
What is OregonSaves?
"OregonSaves is an easy, automatic way for Oregonians to save for retirement at work. Workers at an employer that does not offer a qualified retirement plan can automatically enroll and start saving into their own personal IRA. OregonSaves is also a public-private partnership. The program is overseen by the State and managed by a private program administrator with extensive experience in the financial services industry, similar to how 529 plans are structured.
"Based on early demographic data, two-thirds of workers age 35-44 choose to participate in OregonSaves when they work at a facilitating employer.3 This means OregonSaves is laying a foundation for a long-term culture shift, in which saving early and throughout your career becomes the norm.
"But beyond the numbers, I love to hear the stories of the savers, like Genevieve from the non-profit Merit NWin Salem. Genevieve told us that OregonSaves is "the easiest retirement program I have ever participated in. It has removed a lot of the stress of having to choose from a long list of decisions that feel overwhelming. Saving for retirement should be easy and painless."
"I'm also excited to see enthusiasm from businesses. Signing up workers is quick and easy. As
How does it work?
"OregonSaves launched in a pilot phase in
"The program is currently registering employers with more than 10 workers. The statewide rollout will continue in waves through 2020, which is the timeline for small firms with four or fewer workers. However, many employers see the benefits of OregonSaves and aren't waiting to register. Employers of any size can enroll at any time ahead of their registration date, and nearly 2,000 have already chosen to do so.
"The program is also open for voluntary enrollment by individuals, including the self-employed, gig economy workers, and those whose employers do not facilitate OregonSaves. Over 250 individuals have self-enrolled since we made that option available late last year.
"OregonSaves is adding approximately 1,800 workers per week and the program now has more than 78,000 workers enrolled. We anticipate a similar volume of workers to enter the program over the next few years, as small businesses join the program in the final waves. The estimated total of eligible workers could be as large as 400,000-500,000.4
"The participation rate of eligible workers has remained steady at around 72 percent, consistent with the market research analysis completed in 2016,5 which estimated opt-out rates of 20 to 30 percent. And, there is potential for opt-out rates to drop over time: data from the
"Workers automatically enrolled in OregonSaves utilize a standard set of options designed to reduce the stress and decision paralysis often ascribed to individuals enrolling in retirement savings plans. The standard savings rate and account type for OregonSaves is 5 percent of gross pay into a Roth IRA. Other states (CA, IL) initially set their standard savings rate at 3 percent, for fear that a higher initial percentage would reduce participation in the program. Our results show the higher percentage has not affected participation. The average savings rate is currently around 5.5 percent, and workers are contributing an average of
"We chose a Roth IRA as the standard account type because workers can withdraw their contributions at any time without penalty. This is an important design feature for new savers, many of whom lack emergency savings to weather financial shocks such as car repairs or medical bills.
"Additional standard design features include depositing the first
"Finally, the standard design includes an automatic escalation of 1% on
"Preliminary analysis of participant data by the
"From the beginning,
"First, registration or exemption. All
"In addition to the self-exemption process, we have determined two other ways to certify that an employer is exempt. If an employer files a federal form 5500 and our staff is able to positively match the business on the form 5500 with the
"Employers that do not offer a qualified retirement plan go online to register. Registration involves verifying basic employer information and affirming the employer does not currently offer a plan. Once registered, the employer is prompted to provide basic information about each worker so OregonSaves can contact individuals to set up their accounts or obtain opt-out forms. Employers can either upload an excel spreadsheet onto the program platform or enter this data manually. Most employers tell us this process takes approximately 30 minutes to an hour, depending on the number of workers and the method used for upload.
"Beginning 30 days following worker enrollment, employers begin transferring contribution amounts to the individual IRAs. Employers using a payroll service provide instructions to their payroll provider to initiate these transfers. Employers without a payroll service handle these transfers as they would any other deduction from an employee's pay. Employers and payroll providers tell us this adds 10-15 minutes to their payroll each pay period.
Program Changes for Employers
"Our original program rules gave employers the ability to make programmatic changes to individual worker accounts and asked employers to distribute program materials to workers. We have since shifted all responsibility for making changes and distributing materials to our third-party program administrator. In so doing, we are reducing the amount of time employers spend facilitating the program and ensuring the information reaching workers is provided in a timely and efficient manner.
"We have also been working together with Illinois Secure Choice and CalSavers to collaborate with the nation's largest payroll providers. At a meeting in
Ensuring Worker Access to OregonSaves
"Our goal is to ensure every
"At a recent House Business and Labor committee hearing, representatives of the business community spoke about the process of creating program rules for employers, and this proposed compliance mechanism. A lobbyist representing several employer groups in
"The OregonSaves call center gets approximately 1,250 calls per month from employers with questions about the program and their role as a facilitating employer. The OregonSaves team has provided over 330 one-on-one training sessions to employers to assist in program set-up and provides informational sessions across the state to employer groups of varying sizes.
"The public overwhelmingly supports OregonSaves. Employers say it is easy to sign up workers, and based on a recent public survey by DHM,8 the level of support has actually increased in the first year. That poll found an astounding 82 percent of people support OregonSaves.
"They know it is the right approach, and that it will improve savings, making
No Fees for Employers; Reducing Fees for Workers
"Facilitating OregonSaves is fee-free for employers. Program costs are covered by fees on the IRA account assets. The all-in fee for workers is capped at 1.05 percent of assets per year. This level will likely drop once the program is fully implemented and assets continue to grow. According to the 2016 feasibility study,9 it is estimated that fees could drop down to 30 to 50 basis points after start-up costs are repaid. In fact, investment fund fee reductions are already a reality. In
Federal Law and Interaction with State Programs
"OregonSaves and the other state-based auto-IRA programs are constantly seeking better ways to serve employers and program participants. We believe the following changes at the federal level would help achieve our program goals of reduced burden on employers and a better product for our participants:
"Creating a robust 5500 database. As previously mentioned, we currently use Form 5500 data to presume employers exempt from the program. While helpful, that data is not as robust as we originally anticipated. Our match rate was approximately 11.5% when comparing our data with the Form 5500 filings. Upon further research, we believe part of the issue is that subsidiary companies are not listed in a way that can be easily searched and retrieved. If a more robust database existed, OregonSaves and the other state programs could more easily exempt employers that offer a qualified retirement plan, meaning we can reduce the administrative burden on exempt employers and focus our efforts and resources on those businesses who need to facilitate.
"Allowing minors to use OregonSaves. Under the age of majority (18 or 21, depending on the state) an IRA is a custodial account that a custodian (typically a parent) holds on behalf of a minor child. The account is transitioned into the child's name at the age of majority. We recommend changing this requirement and allowing minors as young as 16 to open their own accounts and hold the money in their own names. This would allow state-based programs to auto-enroll minors working at facilitating employers and get young workers in the habit of saving early in their working lives.
"Exemption from future federal legislation. When considering federal legislation that would overlap or create national-level retirement savings programs, we would ask for an exemption to allow state-based programs to continue where they already exist.
"OregonSaves is already succeeding and achieving the goal of improved access to retirement savings. Workers and businesses across
"The success of OregonSaves will have long-term positive implications for the savers and for
"And we are just getting started."
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