Expanding Retirement Access Through State Auto IRA Programs

About half of private sector workers, many of whom work for smaller employers, lack access to payroll deductions for retirement savings. State Auto IRAs are structured to meet the needs and concerns of smaller businesses and others that don’t offer a retirement benefit. 

Auto IRA Plus would create a network of 50 state Auto IRA savings programs. Federal legislation would require all 50 programs to have the same basic structure and meet certain standards, but individual states could tailor their program to meet the specific needs of their economy. If a state chooses not to have its own Auto IRA, it could allow another state’s to serve their businesses. Employers could choose to either offer a 401(k)-type plan or allow their workers to use the state Auto IRA.

State-facilitated Auto IRA programs offer a simple structure for employers and employees, with no fees or administrative burden for businesses and default savings options for workers. These programs provide portability, encourage saving through automatic enrollment, and can work alongside 401(k)-type plans. This report addresses ways to greatly expand coverage using simple, cost-effective Auto IRA programs in all 50 states. Read the full report.

Key Takeaways:

• State Auto IRA programs require employers without retirement plans to either open a 401(k)-type plan or give employees access to a state-run program that has no employer fees and minimal administrative responsibilities.
• Creating a network of 50 state programs will greatly increase coverage, and especially meet the needs of smaller employers and their workers.
• Employees benefit from automatic enrollment, payroll deductions, default contribution and investment options, and accounts that move with them to other participating employers.
• State programs can be tailored to local economic needs while meeting basic standards and can use open bidding, performance monitoring, incentives, and penalties to ensure compliance.
• Simplifying portability, eliminating asset tests, and improving access to the Saver’s Match will help workers maintain savings and build higher balances.
• States should provide comprehensive financial resources and emergency savings options to help families manage unexpected expenses and stabilize their finances.