Last year, Oregon became the first state to roll out a mandatory retirement plan, and now the state is expanding the program to individuals, such as self-employed or gig economy workers.
The state-run program, OregonSaves, launched with a pilot program last November, focusing on the 2,000 Oregon employers with 100 or more employees. It now includes more than 45,000 employees, who have contributed more than $9 million towards retirement. Workers are saving an average of $114 a month.
Individuals can save through individual retirement accounts that are mobile friendly. They can put aside as little as $5 a month via automatic contributions or payroll deduction.
The investment options, chosen by Segal Marco Advisors, include a series of target-date funds by State Street Global Advisors, with management fees in the range of 8 to 12 basis points. All in, the employee is going to pay around 100 basis points. But Ascensus, the plan’s administrator, expects costs will come down.
In March, the state settled a lawsuit filed against it last year by an employer advocacy group. The ERISA Industry Committee, or ERIC, sued the Oregon Retirement Savings Board in U.S. District Court, arguing that the plan’s reporting requirement obstructs federal law.
The lawsuit was largely about the unsubscribe process for large employers, not the OregonSaves program itself. The program requires employers who already have retirement plans to file paperwork every three years to qualify for exemption from the state law. ERIC, an advocacy group for large employers on employee benefit public policies, said that ERISA, a federal law, governs reporting on plan activities.
The state continues to sign on employers who don’t offer retirement plans, in waves, with the next deadline, for employers with 20 or more employees, being Dec. 15. It will be fully implemented by the end of 2020.
Aside from Oregon, five other states have enacted legislation establishing state-run retirement plan programs, including California, Illinois, Connecticut, Maryland and Massachusetts.