Rhode Island General Treasurer James Diossa announced Wednesday that the Rhode Island Treasury will launch the RISavers Program, an auto-IRA plan for Rhode Island private sector employees not currently offered a plan by their employer.
RISavers—created by the Secure Choice Retirement Savings Program Act passed by the Rhode Island General Assembly in June—will partner with an existing similar program in Connecticut to offer Rhode Islanders access to retirement savings. Vestwell, a third-party administrator, will run the program in coordination with the state’s treasury, adding to the firm’s list of state-facilitated automatic IRA programs that includes Connecticut, Colorado, New Jersey and Oregon.
Rhode Island’s treasury plans to launch a pilot program in early 2025, with a full program launch followed shortly thereafter. The interstate partnership with Connecticut is the second of its type in the U.S.; Colorado offers an interstate consortium of state-run plans, which includes partnerships with Delaware and Vermont.
Employees at eligible businesses will be automatically enrolled in the program but can opt out at any time. The individual retirement accounts opened under RISavers will follow the employees if they change jobs. In addition, employees will have the ability to choose their risk preference and contribution rate.
Contributions will be processed as automatic payroll deductions, with employers providing program information and processing their employees’ deductions. Matching contributions are not allowed in the program, as with other state-facilitated programs.
Connecticut launched its program, MyCTSavings, in March 2022. Nearly 30,000 Connecticut residents have saved more than $33 million with the program to date, according to Rhode Island’s announcement.
“Over 170,000 Rhode Islanders lack access to a retirement savings plan at work,” said Diossa in a statement. “With this strategic partnership, Rhode Island has taken the first step to closing the retirement savings gap. … Through this interstate agreement, we gain an experienced partner that will help Rhode Island implement RISavers quickly and administer the program efficiently.”
RISavers will be overseen by the state treasury in cooperation with Vestwell State Savings.
Rhode Island marks the 20th state to launch an auto-IRA program. State-facilitated plans have accumulated more than $1.78 billion in assets, according to the Center for Retirement Initiatives at Georgetown University.
Treasury, IRS Advised for Simplicity, Public Push on Saver’s Match
Recordkeepers, industry organizations and academics weighed in on how to best get plan sponsors to implement a federal matching program for lower-income workers.
The IRS and U.S. Department of the Treasury have received responses from industry organizations and individuals representing employers, recordkeepers and participants regarding how to best implement the Saver’s Match program created by the SECURE 2.0 Act of 2022.
The IRS and Treasury received more than 100 public comments in response to their September request for feedback, with responses coming from a mix of financial professionals, industry organizations and plan providers.
The Saver’s Match is designed to provide a federal match into a defined contribution plan for lower-income workers; the program will replace the current Saver’s Credit, a tax credit, with a federal match of up to $1,000 at a rate of $0.50 per dollar contributed by a worker.
While commentator focus areas varied, there was a consistent theme calling for simplification, both of delivery and of reporting needs. Many pointed out that, because plan sponsors will not be required to offer the benefit, ease of use and seamless distribution across Treasury, recordkeepers and the IRS will be essential.
Mark Iwry, a nonresident fellow at the Brookings Institution and a former senior adviser to the U.S. Secretary of the Treasury who helped craft SECURE 2.0, wrote of an attempt to institute such a matching program as far back as 1999. While his letter showed he does not view the current setup as perfect, he is a champion of getting as much uptake as possible when the Saver’s Match is implemented in 2027.
“Although the expanded Saver’s Credit (which we suggested renaming as the Saver’s Match) is still limited to a maximum of $1,000 per year, permits plans and IRAs to refuse the matching deposit, and has been subjected to a long-delayed effective date, it represents an unprecedented reform to our system,” Iwry wrote. “The improved outcomes for potentially 20 to 30 million [low-to-middle-income] savers (or more) will be well worth the coordinated effort by Treasury and IRS and by private-sector stakeholders to implement the Saver’s Match in an effective and workable manner.”
Iwry went on to lay out more than a dozen process suggestions, including:
Forgoing the need for savers receiving the match to claim it on their tax return, as many are not required to file a return;
A unique identifier number provided by plan administrators, recordkeepers or individual retirement account owners that would include all the personal and account information needed to for the federal match to be deposited; and
A “data before dollars” strategy in which advance notice of a deposit is sent, then either approved or denied by the plan administrator, to try and mitigate errors.
Retirement Industry Organizations
The SPARK [Society of Professional Asset Managers and Recordkeepers] Institute submitted in a lengthy comment letter based in part on meetings it has held with industry stakeholders on how to best implement the program.
SPARK Institute Executive Director Tim Rouse laid out the challenges the institute sees in “developing a reliable and efficient system for getting Saver’s Match contributions transferred from the Treasury to an individual’s account within a retirement plan,” which is an institutional arrangement between the employer and the participant, with recordkeepers in between.
The letter went on to suggest various ways of setting up a seamless transaction, such as tracking numbers for participants, using IRS Form 8888—currently used for direct deposit of tax refunds to IRAs—or utilizing existing information such as participants’ social security numbers and employer identification numbers.
Pew Charitable Trusts, which has coordinated working groups to help advance the Saver’s Match, called on Treasury and the IRS to “automate as much as possible” of the program to ensure uptake. John C. Scott, Pew’s project director for retirement savings, noted the current uses—and friction points—for Form 8880, used for the current saver’s credit; he suggested solutions to improve it by way of simplicity and uptake, including offering it free via tax software.
Pew’s Scott also called on Treasury to fund and advance a “general publicity campaign” through channels such as social media that are “direct, easy-to-understand, and actionable.”
The AARP also weighed in, noting the potential for the Saver’s Match to improve savings across household wealth, generally, and in a way that could narrow the racial wealth gap. The organization called for the tax setup for the match to be offered free via tax software.
Recordkeepers and States
Retirement plan companies including Paychex Inc., the Retirement Clearinghouse LLC, TIAA and Vestwell also weighed in with public comments.
Among calls for simplicity, TIAA recommended a system to “hold matching contributions that are rejected” due to inadequate information or errors so they can eventually get to participants.
“A holding mechanism, including an account, is necessary to ensure that rejected matching contributions are preserved and allocated once any outstanding issues are resolved, thus protecting individuals/participants from unintended financial loss,” wrote Wayne McClain, a TIAA managing director and associate general counsel.
TIAA also made the case that Treasury and the IRS, rather than plan sponsors, should be responsible for communicating eligibility and benefits to participants, as it is “unrealistic to expect plan sponsors to navigate the complexities of individual financial situations.”
Retirement Clearinghouse, which oversees the Portability Services Network of recordkeepers, made the case that the piping for its portability network could be used for the Saver’s Match for both in- and out-of-network recordkeepers.
“With modification, the functionality and operations utilized by PSN members can be extended to non-PSN recordkeepers who chose not to be a part of PSN or are not fully automated, as well as IRA providers that are, or are not, fully automated,” Retirement Clearinghouse President and CEO J. Spencer Williams wrote.
Some state treasuries also contributed commentary, including California, which has the largest state automatic individual retirement account program.
Angela Antonelli, a research professor and executive director of the Center for Retirement Initiatives at Georgetown University, pointed out the potential for the match to bolster recently introduced state auto-IRA programs, but only if executed thoughtfully.
“Because employers are not allowed to match contributions in the state auto-IRA programs, the Saver’s Match will provide a much-needed boost for individuals saving through these state programs,” she wrote. “As Treasury and the IRS consider how to implement the Saver’s Match, some concerns, if left unaddressed, could potentially increase operational costs for SFRPs or, in the worst-case scenario, prevent SFRP participants from receiving these matching funds.”
