Michigan Office of Retirement Services

Amy Resnick (left), Allison Wardlaw (right); Photo by Matt Kalinowski

The Michigan Office of Retirement Services has been a pioneer in incorporating automated design features into retirement plans for public employees, starting with automatic enrollment in 2010. In 2016, it added automatic escalation at 1% a year, barring opt-out, via its Small Steps program. This approach was groundbreaking for government plans—many have yet to add such features, says Len Goff, vice president and strategic relationship manager at recordkeeper Voya Financial who works with the Michigan plans.

“What I’ve found most impressive is that, rather than merely chasing trends, the [ORS] demonstrates a deep understanding of the retirement landscape, stays updated on emerging trends and tailors solutions to suit its participant base,” Goff says.

Since female employees comprise about 70% of total plan enrollment, the office and Voya, in 2022, implemented the Women and Retirement campaign, to address that group’s needs for retirement planning.

The state has further sharpened its focus on this group’s preparation, says Anthony Estell, executive director of the ORS, in Lansing, Michigan. It had Voya conduct a longitudinal study to ensure that the Small Steps program benefited all participants, specifically the female demographic, Estell says.

According to Goff, Voya’s data and analysis of the trends from 2017 into 2023, showed that, “For plan participants who stayed in the program continuously for all six years and did not opt out, their average income replacement increased from 55% in 2017 to 88% as of September 2023.”

The retention rate among 401(k) and 457(b) participants who accept the escalations has remained in the 90% to 95% range, says Estell. With average deferrals for the 401(k) now hitting 10.7%, the office raised its target average rate from 10% to 15%, the auto-escalation ceiling.

Voya says, 61% of the 401(k) and 457(b) participants overall are on track to maintain at least 70% of their pre-retirement income after retiring, compared with only 20% before Small Steps launched.

The state additionally was progressive among government employers in migrating to defined contribution plan coverage for new hires, when, in 1997, the state’s defined benefit plan closed to new participants. It moved to auto-enrollment for new school employees in 2010 and for all new employees in 2012.

The reason it adopted auto-enrollment so early, Estell says, was “necessity. We now had a group of workers who were entirely in charge of their retirement outcome.” All new state employees are defaulted into the 401(k), and all employer contributions go into that plan; employees may also join the 457(b) and have their deferrals go there instead.

—Judy Ward