Taking Account of State-Run Retirement Plans

Three states have programs up and running to make retirement plan coverage available to those whose employers do not offer it. So where do they stand? A recent report provides a look. 

The Center for Retirement Initiatives at Georgetown University’s McCourt School of Public Policy in a Monthly State Program Performance Data & Trends report provides information on the three state-run retirement programs that are now in operation—those in California, Illinois and Oregon. The state program performance data it provides look at assets, account activity, registrations and participation. 

The center reports that in the most recent month-to-month data, all three programs are growing in assets and the number of employers registered and funded accounts. Deferral rates in all three are holding steady. The amount withdrawn, as well as the number of accounts making withdrawals, also has grown. The growth in all these programs, in all these areas, was pronounced in the fourth quarter of 2020. 

At Year’s End

Here’s where these programs stood as of New Year’s Eve:

Note: the disparities between these programs’ results in explained in part by the differing length of time that the particular programs have been in operation.

As 2021 Begins

In the first month of 2021, CalSavers and Illinois Secure Choice reported the following figures: 

But Wait—There’s More

While they are not the kind of program that California, Illinois and Oregon have enacted, Massachusetts and Washington state also have set programs in place to provide some kind of coverage to employees whose employers do not offer a retirement program. The Center provides the following information about these programs. 

Massachusetts

The Massachusetts Defined Contribution Plan is a portable 401(k) multiple employer plan arrangement (MEP). The program is the nation’s first state-sponsored MEP for private-sector employees; it launched in October 2017.

• Nonprofit employers with 20 or fewer employees may voluntarily participate. 
• Employers may, but are not required, to contribute to employee accounts. 
• Employees are automatically enrolled; however, their participation is voluntary—they may opt out. Employees may change their contribution level or investment options at any time.
• Employee payroll contributions are at a default rate of 6%. Contribution rates automatically increase by 1% or 2% each year until they reach a maximum of 12% of gross pay. The maximum contribution rate increased to 15% on Jan. 1, 2021.
• Participants can choose from investment options that include: (1) default target date funds, (2) a managed accounts service, or (3) four objective-based funds including an income fund, a growth fund, an inflation fund and a capital preservation fund. 

As of Dec. 1, 2020, more than 90 nonprofit employers had agreed to join the plan, and 80% of participating employers had elected to offer matching or nonelective employer contributions. More than 600 eligible employees were covered under the plan, and there was $6.9 million in assets under management. 

Washington  

The Washington Small Business Retirement Marketplace provides individuals and small businesses a way to compare and find low-cost, easy to manage retirement plans through a website. The program launched in March 2018 as the nation’s first state-facilitated marketplace program for private sector employees. Employers with fewer than 100 employees may voluntarily choose to participate. 

As of June 2020, 16 businesses have enrolled in the Retirement Marketplace, and the program offers nine plans through three financial service firms. By then, 23 individual accounts were created, and there were $1.3 million in assets under management.