State of Oregon (Oregon Savings Growth Plan)

For years, the vast majority of public employees participating in the Oregon Savings Growth Plan could only contribute on a flat-dollar basis, because of limitations in the state’s payroll system. Just 14% of participants, who worked for local governments with different payroll systems, could opt to participate on a percent-of-pay basis, and only 4% actually did.

That meant, for 86% of participants, their deferral could increase only when they initiated a change in the amount of their flat-dollar contribution. “Many folks do not take the opportunity to look at their contribution rate [very] often,” says Jack Schafroth, interim OSGP program manager, at the plan’s offices, in Salem, Oregon. “It definitely had the effect of folks keeping their old, flat-dollar contribution amount longer than they should have.”

Effective in December 2022, the office began allowing all participants to choose between a percent-of-pay and a flat-dollar contribution. Oregon Public Employees Retirement System officials had long wanted to offer all employees that choice, Schafroth says, but it wasn’t until an upgrade of the state payroll system that they could.

When communicating about the new percent-of-pay option, the OSGP, working with its recordkeeper Voya Financial, has explained it to employees via two concepts: contributing pennies per dollar or contributing a percent of pay. Framing the employee contribution rate as a percent of pay can backfire with some employees, according to a 2022 Voya Behavioral Finance Institute whitepaper, “Reducing Savings Gaps Through Pennies Versus Percent Framing.” Why is that?

“Individuals who are traditionally underrepresented, and may not be as financially literate, tend to not understand percentages,” says Deirdre Jones, vice president and strategic relationship manager at Voya in Philadelphia, who works with OSGP. “Reframing percentages as pennies per dollar can help individuals better understand and relate to saving in a more tangible way. For example, ‘10 pennies per dollar’ sounds much more doable than ‘10% of your annual salary.’”

So for State of Oregon employees making $49,999 or less annually, the plan communicated about the change in terms of pennies per dollar; employees making $50,000 or more received communications that expressed the new option as a percent-of-pay contribution. Videos, web pages created for this educational campaign and postcards all had consistently one of the two versions of framing.

During the first three months after implementation, approximately 500 participants a month switched from a flat-dollar contribution to a percent-of-pay contribution, Schafroth says, adding that this has now leveled out to an average of 200 participants a month making the change. Among newly enrolled participants, roughly half have chosen a percent-of-pay contribution, and half the flat-dollar amount, he says.

Overall, the percent of participants contributing on a percent-of-pay basis has risen from that 4% before the change to 15% now. Over time, Schafroth says, he expects to see that percentage grow and, as a result, see those participants’ average deferrals increase since they now will be calculated on a percent-of-pay basis. “That is over the long term,” he says, “as the annual salary increases come.”

—Judy Ward