January 7, 2019
Employee Benefits

As CT retirement plan slowly approaches, Oregon offers initial insights

Photo | HBJ File
Photo | HBJ File
CRSA Chairman Scott Jackson said he expects enrollment in the state-created retirement plan to begin in the coming months.
Matt Pilon

As Connecticut's state-created retirement plan for private-sector workers aims to start enrollment this year, a similar system in Oregon is showing mixed results as it rolls out, potentially hinting at what's ahead for the Nutmeg State.

OregonSaves, launched in 2017 as the U.S.' first state-sponsored, private-sector retirement plan, reached nearly 22,000 accounts as of November with about $10 million in assets, according to the Center for Retirement Research (CRR) at Boston College, which has analyzed the design of retirement systems in Oregon, Connecticut and elsewhere.

CRR had initially projected that OregonSaves would reach a higher asset total in its first year ($100 million), but the group recently told the Wall Street Journal it had overestimated how quickly bigger employers would sign up, and that there have been delays between registration and employees making initial deposits.

For those who support state-mandated retirement plans, which aim to reverse workers' woefully inadequate retirement-savings habits, the bright side in the initial Oregon data is in employee behavior.

One of the most important statistics being watched by states with either newly launched programs (like California and Illinois) or those still working to set theirs up (like Connecticut and New York) is how many automatically enrolled workers choose to opt out.

In Oregon, opt-out rates are meeting initial expectations, with 29 percent of eligible workers formally choosing not to participate, CRR said. The most common reason given by those who opt-out is they can't afford to save, followed by those who say they have another retirement plan.

A second key metric is the level at which participants choose to contribute, known as the deferral rate. As of November, 93 percent of participants in OregonSaves had not changed the default savings rate of 5 percent of income, CRR said. (Connecticut is planning a default rate of 3 percent.)

CRR noted that OregonSaves will begin increasing its default deferral rate in 2019, and for the next five years, until it reaches 10 percent.

The Connecticut Retirement Security Authority (CRSA), which still hasn't named an executive director, has been working to set up its own auto-enrollment plan since the legislature ordered it to do so in 2016. The goal is to provide a savings vehicle for the estimated 600,000 state residents whose employers do not offer one.

Key advocates for the program have included Comptroller Kevin Lembo and AARP.

There have been delays. The program, which faced opposition from the Connecticut Business & Industry Association (CBIA), was originally slated for implementation at the start of 2018, but the CRSA postponed the rollout, citing complexities.

Meantime, a recent legal challenge to California's retirement program, which argues CalSaves violates federal law, presents a potential legal hurdle for Connecticut and other states.

The CBIA has called the retirement program a potentially costly burden on businesses, since employers would have to dedicate resources to inform employees about the plan (though company contributions are not required or allowed). CBIA has also said employees can sign up for private IRA accounts.

Despite the slow start, CRSA Chairman Scott Jackson said he expects progress in the coming months.

"I think you'll see a lot of movement in the first quarter of 2019," said Jackson, who is also commissioner of the state Department of Revenue Services. "We will do a phased roll out with some companies that are excited to participate."

Correction: A previous version of this story incorrectly stated CRSA Chairman Scott Jackson's title. He is commissioner of the state Department of Revenue Services and former commissioner of the state Department of Labor.

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