A National Program Like OregonSaves Would Reduce Retirement Deficit

Because OregonSaves and other state-sponsored defined contribution plans provide a “valuable experiment of approaches that could potentially reduce the nation’s projected retirement deficit,” according to the Employee Benefit Research Institute (EBRI), the organization did an analysis of the effect of a national OregonSaves program.

EBRI found that a national program would reduce the $3.83 trillion retirement savings shortfall (RSS) by $456 billion, or 12%.

However, it there were a nationwide implementation of 401(k) safe harbor plans among employers currently not offering a defined contribution (DC) or defined benefit (DB) plan, the deficit would decline by $645 billion, or 17%.

“The analysis also clearly shows that increased coverage is not the only impactful way of reducing the retirement deficit,” EBRI says in its issue brief, “What if OregonSaves Went National: A Look at the Impact on Retirement Income Adequacy.” “We added a full auto portability scenario to both of the access expansion scenarios.”

Under the national OregonSaves program with auto portability, the deficit would decline by $759 billion, or 20%. For the 401(k) safe harbor plan expansion with auto portability, the deficit would decline by $1.031 billion, or 27%.

EBRI notes that OregonSaves was launched in July 2017 with a small pilot group of employers. Since then, it has been rolling out in phases and is scheduled to finish its roll out in 2020. Contributions are made post-tax and the initial deferral rate is 5% with annual escalations of 1% up to a 10% contribution threshold.

In conclusion, EBRI says it will continue to study OregonSves and other state-sponsored DC plans because of the positive impact they can have on retirement savings shortfalls in the nation.