A Growing List of States Look to Boost Retire Savings Through ‘Auto-IRA’ Programs

Financial advisor explaining paperwork to elderly retired couple front of desk.
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If you need evidence of the importance lawmakers place on personal retirement savings, look no further than the growing movement by state governments to provide retirement plans to workers whose employers don’t offer them.

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Last week Maine joined the list, becoming the latest state to pass a law requiring most employers that don’t offer a retirement plan to automatically enroll their workers in an individual retirement account through a state-administered program, CNBC reported Tuesday. Maine’s move follows similar measures by New York’s state legislature and New York City municipal leaders.

Three states already offer so-called “auto-IRA” plans: California, Illinois and Oregon. A number of other states, including Colorado, Connecticut and Maryland, are expected to launch pilot programs this year for their own auto-IRA plans. Lawmakers in Virginia approved a bill earlier this year that also authorizes an auto-IRA plan.

These programs work much like most employer-sponsored retirement plans. Workers are automatically enrolled through a payroll deduction — typically starting at around 3% or 5% — unless they opt out. Employers don’t have to pony up any money to operate the plans, and the accounts themselves are managed by private investment firms.

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Not all the programs are exactly the same. Some involve Roth IRAs, whereas others involve traditional IRAs.

As noted on the website of the National Association of Plan Advisors, a non-profit professional organization, Maine’s law requires each covered employer to let covered employees decide whether they want to contribute to a payroll-deduction Roth IRA by automatically enrolling them. Covered employees who don’t want the plan can opt out, though they’ll be reenrolled at regular intervals with the option to opt out again. Maine’s Retirement Savings Board could expand program by also letting employees contribute to a traditional IRA.

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Already this year, several jurisdictions have either pursued or expanded auto IRA programs, NAPA noted, including the following:

  • In Virginia, Gov. Ralph Northam signed legislation creating the VirginiaSaves program.
  • In Delaware, legislation creating the Expanding Access for Retirement and Necessary Savings program is pending in the General Assembly.
  • New York City enacted a mandatory “Retirement Security for All” program.
  • An expansion of the Illinois Secure Choice program is awaiting the signature of Gov. J.B. Pritzker.
  • In New York State, legislation making the state’s voluntary auto-IRA program mandatory is awaiting the signature of Gov. Mario Cuomo.
  • Several other states, including Massachusetts, Vermont and Washington, have programs in place that make participation voluntary.
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“Among all state auto-IRA programs now passed — 14 states to date — more than 20 million of the 57 million workers who lack access will have the opportunity to save,” Angela Antonelli, executive director of Georgetown University’s Center for Retirement Initiatives, told CNBC.

At the federal level, legislation is pending in Congress that would require employers to ensure part-time workers are eligible for company 401(k)s. State-run auto-IRA programs already cover part-time workers.

These are considered important steps in helping ensure that more Americans are financially prepared for retirement. Workers are 15 times more likely to save for retirement if they can do so through their job, CNBC noted, citing research from AARP.

“The more options there are available to workers, the better,” Antonelli told CNBC. “There’s a huge [retirement savings] gap to fill.”

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Last updated: Oct. 25, 2021 

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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