CFED Assets & Opportunity Scorecard
Retirement savings are an important source of income and financial stability for older adults. With the decline in availability of defined-benefit pensions, retirement savings are the main way retired adults augment Social Security benefits. However, according to the Employee Benefit Research Institute, only 66% of workers in medium and large businesses—and 33% of workers in small businesses—participate in employer-provided retirement plans. As a result, after retiring, more than half of U.S. households and two-thirds of low-income households will not have the income to maintain their pre-retirement standard of living, according to the Center for Retirement Research.
States can implement Automatic Individual Retirement Accounts (Auto-IRAs) as a state-administered alternative for workers who have no access to an employer-based retirement plan. Auto-IRAs use a state’s existing retirement or investment infrastructure or contracts with a private investment firm to pool the investments of thousands of workers at small- and medium- sized businesses to lower fees, provide professional fund management and allow smaller businesses to offer competitive benefits. Participants of Auto-IRA programs build retirement savings though a payroll deduction. An advantage of Auto-IRA is that the accounts are portable from job to job.
Strength of State Policies: Retirement Savings
|Does state run an auto-Individual Retirement Account program?|
|District of Columbia|
Notes on the Data
1. Data based on CFED research in July 2015.
2. Although California has not implemented a state Auto-IRA program, in 2012, the state enacted legislation that requires a Savings Investment Board chaired by the State Treasurer to complete a market and legal analysis on the implementation of an Auto-IRA program. The study is expected to be completed by the end of 2015. The Board will provide recommendations to the Legislature on how to implement the program.
How States Are Assessed
States receive credit if they have passed legislation or approved regulations that allow for a state-run Automatic Individual Retirement Account program to be immediately implemented in the state.
What States Have Done
Two states have adopted a state-run Automatic Individual Retirement Account. In December 2014, Illinois became the first state to pass Auto-IRA legislation that can be immediately implemented by the state’s Treasury Department. In June 2015, Oregon followed suit enacting legislation to implement its own Auto-IRA program. Although California does not have a state-run Auto-IRA, in 2012, the California legislature passed the Secure Choice Retirement Savings Trust Act. The bill requires the California Secure Choice Retirement Savings Investment Board to conduct a full market analysis to determine whether the necessary conditions for implementation can be met.