In “Participation and Leakages in Oregon’s Auto-IRA,” Laura D. Quinby, Wenliang Hou, Anek Belbase and Geoffrey T. Sanzenbacher of the Center for Retirement Research (CRR) at Boston College examine data on participation and use of funds by participants. They observe that measurements vary widely on participation and that there is “leakage” for a variety of reasons. Most of all, though, they argue that it’s just too soon to draw firm conclusions about the program.
Participation
OregonSaves itself reported that shortly after its two-year anniversary, that 104,348 employees – 71% of those eligible – had enrolled. But Quinby, Belbase and Sanzenbacher dispute that finding.
In the CRR report, the authors assert that it’s just not that simple. The problem, they say, is how one defines participation. That seems like an easy proposition, but they suggest that there is more than one way, noting thatthere is no common definition for participation despite there being a large amount literature on pension participation. The researchers say that there are three definitions that are typically used:
- having a positive account balance at one’s current employer;
- reporting that one is participating; and
- making contributions to a plan.
The report says that 31% of eligible employees opt out of OregonSaves and 2% set their deferral rate to zero and withdraw their balances, for a participation rate of 67%. But it also notes that 48% of eligible employees have positive balances in their OregonSaves accounts.
Leakage
Michael Parker, Executive Director of the Oregon Savings Network, which oversees OregonSaves, said in August 2019 that by the middle of that month, there were 4,578 participants who had had balances but had depleted their accounts, adding: “Most of those seem to have cashed out entirely, but we do see instances where folks contribute and then withdraw multiple times.”
The CRR report also said that 20% of employees with balances in September 2018 made at least one withdrawal in the 12 months after that, and that the average withdrawal was $1,000. It also said that 32% of withdrawals were attributable to employees who left the employer where they had worked when they became covered by OregonSaves, while 17% resulted from withdrawals from full-year contributors.
Too Soon
“Although straightforward conceptually, measuring participation in OregonSaves is difficult in practice,” the researchers write. They say that is because:
- the program is still being rolled out;
- employee mobility is high; and
- key information is missing from administrative data.
“Although this study solves the issues of program rollout and employee mobility by developing a clear conceptual framework for measuring participation, it cannot overcome the data limitations,” the researchers write. They say that it is not clear yet how participants will use their account balances, and that it is too soon to draw any conclusions regarding how OregonSaves is affecting household finances.
