A National Program Like OregonSaves Would Reduce Retirement Deficit

The Employee Benefit Research Institute also found an expansion of 401(k) safe harbor plans nationwide would reduce the deficit by even more.

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.