Business is booming at Guideline, an Austin, Texas–based company that administers employee retirement savings programs for mostly small and midsize businesses.
Since 2020, Guideline has nearly quadrupled its client base to some 38,000 companies, says Jeff Rosenberger, the firm’s chief operating officer. Of the more than 14,500 new clients signed up last year, 90 percent were offering their workers a retirement plan for the first time.
“We are riding a market wave of 401(k) plan development and adoption,” Rosenberger says. He links the growth to a proliferation of incentives for companies to set up plans, including new state requirements, changing federal policies and growing employee demand in a competitive job market.
The trend could have a significant impact on U.S. workers’ ability to build financial security later in life. About 57 million people — nearly half of the country’s private-sector employees — do not have access to a traditional pension or a retirement savings plan at work, according to a July 2022 AARP report.
The retirement savings gap is especially acute among small-business workers, the study found. Over three-quarters of workers at firms with fewer than 10 employees, and nearly two-thirds of those at companies with 10 to 24 employees, lack access to a retirement plan.
States expanding “auto IRAs”
One factor shifting the landscape for workplace plans is the emergence of state programs designed to provide retirement savings options for employees who don’t have access to a 401(k) or traditional pension.
AARP has championed these programs, which to date have been enacted in 16 states. Most involve “auto IRAs,” which typically require employers of a certain size (for example, those with at least five employees) that don’t offer their own retirement savings option to enable workers to save through a state-sponsored program, via payroll deductions to an individual retirement account.
“We know that 57 million Americans work in jobs that don’t offer a way to save for retirement. When states step up and provide a way to save, we see the financial security of these workers improve,” says Jessica Eckman, an AARP government affairs director focused on retirement savings issues.
As of January 2023, auto IRA programs up and running in six states — California, Colorado, Connecticut, Illinois, Maryland and Oregon — had enrolled more than 600,000 people, according to data from the Pew Charitable Trusts. Six more states are working toward implementation of auto IRAs.
Contrary to concerns that the state programs would discourage employers from establishing or maintaining workplace plans such as 401(k)s, they appear to be spurring growth in the private market, according to a December 2022 Pew study.
Researchers found that in the first year after Oregon, Illinois and California launched auto IRAs, businesses in those states started retirement savings plans at a 35 percent higher rate than in states without automated savings programs.