Oregon savings plan nears $5M in its first year

Oregon’s pioneering state-sponsored retirement plan reached its first birthday this week, after rapid growth during the past two months.

OregonSaves now has enrolled more than 32,000 private-sector employees who previously didn't have access to a retirement savings option at work. They’ve so far set aside a combined $4.6 million of their own money through automatic payroll deductions, with an average withholding of 5.14 percent of salary.

The state-run plan doesn’t require any financial contribution from employers, but they must sign up their workers for OregonSaves if they don’t offer a 401(k) or other retirement plan. That could mean as many as 600,000 Oregonians.

The effort started last summer with volunteer businesses, then it required big businesses to get on board at the start of 2018.

But it really ramped up in mid-May, when employers with between 50 and 100 workers were brought in. Smaller businesses are far less likely to offer retirement savings plans to their workers.

The May expansion tripled the number of people in the program, while another 14,000 workers are still in the process of being enrolled. The percentage of workers proactively opting out of OregonSaves also grew during the latest influx of workers: So far, 72.5 percent of employees have stayed in the program after being automatically signed up down from around 80 percent earlier this year.

Proponents argue that setting up the automatic payroll deductions is the nudge in the right direction that workers need to start preparing for retirement.

“OregonSaves is off to a successful start,” state Treasurer Tobias Read said in a prepared statement. “By helping more people save for their retirement, OregonSaves is addressing the retirement savings crisis head-on, and making businesses more competitive.”

Several other states — including California, Illinois and Connecticut — followed Oregon’s lead in setting up state-run retirement plans.

Investment earnings for OregonSaves were poor in the first quarter of 2018, with all funds down about 1 percent in value, with the stock market sluggish.

Individual workers’ money isn’t invested until their retirement accounts reach a balance of $1,000, however, and most OregonSaves members haven’t reached that threshold.

The retirement accounts are only Roth IRAs, meaning contributions are made with after-tax dollars. They’re invested by Ascensus, a Pennsylvania company that won a 10-year state contract to handle OregonSaves funds.

Workers have a limited range of investment options, mostly index funds and other low-cost funds, and pay an annual account fee of 1.05 percent to cover state and investment costs.

The fees cover the startup costs and ongoing staff for the new government program.

Employees can track their accounts on a state-run online portal and keep their Roth IRA when they change jobs. They can withdraw the money penalty-free once they reach the age of 59.5 or for a few other strictly limited purposes.

The next expansion is for Oregon employers with between 20 and 49 workers, who will have to enroll their workers by Dec. 15. Self-employed Oregonians also will be eligible for the program by the end of 2018.