State launches retirement plan
When Oregon began to roll out its state-sponsored retirement savings program — Oregon is the first in the nation to do so — Bridget Towles decided to sign up for herself and her six employees.
Towles is a teacher and director of B's Preschool, based in North Portland's Kenton neighborhood. She said she was approached by Joel Metlen, public engagement manager for the new OregonSaves program.
"I had been interested in having my own retirement plan and also providing some kind of benefit to my staff," Towles said. "It was a no-brainer to say yes, we will do it."
All six employees are in their 20s or 30s — the target population for the new program, which enables them to amass savings over three or four decades.
Towles was among the employers participating in two pilot projects for the program, which began its first statewide rollout in mid-October. Large employers with 100 or more workers had until Nov. 15 to enroll in the program or inform the state that they are exempt because they already offer such plans.
The pilot projects involved about 50 mostly smaller employers, and total contributions from employees have topped $100,000.
The program, which will phase in over three years, is intended to reach about 1 million Oregon workers at 64,000 businesses who now have no access to a retirement savings plan at work. Nationally, 55 million workers fall into that category.
The program is based on payroll deductions and is similar to individual retirement accounts. Based on the pilot projects, workers are contributing an average of just under 5 percent of their pay. Employers do not make contributions.
Although enrollment of all workers is automatic, individuals can choose to opt out. However, among the 2,400 workers covered in the two pilot projects, participation averaged around 75 percent, far greater than the 4-percent average
for purely voluntary participation.
The program has no connection with Oregon's Public Employees Retirement System.
Oregon is first
Towles was part of a panel sponsored by AARP Oregon, which has advocated for such a program since 2013, when the Oregon Legislature authorized a study. Lawmakers approved it in 2015, with a starting date of July 1 of this year.
"We saw this national crisis in retirement savings, and there has been a lot of research into what can help," said Joyce DeMonnin, an AARP Oregon spokeswoman based in Clackamas.
"A national organization like ours would be a good leader and partner in this kind of opportunity to let people save their own money as the retirement landscape has shifted."
Pensions have shifted from defined-benefit plans of employers to defined-contribution plans, under which employees assume more risk in investments.
Among the participants in a recent Oregon survey willing to disclose it, more than half said they had saved $25,000 or less — and 63 percent of all participants said they worried about having enough in retirement.
The national average for savings is estimated at just $12,000.
Other states have authorized similar programs — Illinois in 2014 and California, Connecticut and Maryland in 2016 — but Oregon is the first to launch one.
A public opinion survey conducted by DHM Research of Portland for AARP Oregon indicates strong support for OregonSaves, although only about 20 percent of the 1,003 survey participants had heard of it.
"What you are doing today is something people genuinely want," said David John, senior strategic policy adviser for the AARP Public Policy Institute and deputy director of the Retirement Security Project at the Brookings Institution, the nation's oldest think tank.
"What you are involved in is going to change people's lives," he said.
A 'culture of saving'
The chief House sponsor of HB 2960 in 2015 was Tobias Read of Beaverton, who was elected state treasurer in 2016 and who leads the Oregon Retirement Savings Board.
"It's clear to me Oregonians recognize that saving for retirement makes sense, but doing so on your own can be daunting," Read said in closing comments. "That is exactly why we developed OregonSaves. What we are doing here is important to create a new culture of saving in Oregon and give an important leg up to people who have not had the easiest time saving."
The public opinion survey for AARP Oregon indicates that 75 percent of the sample believes retirees will depend more on public assistance if their savings are inadequate. A new analysis by the AARP Public Policy Institute says if the bottom 40 percent of earners were able to increase their retirement income by $1,000 more per year, Oregon's budget could save $98.9 million in public assistance between 2018 and 2032 — and total federal and state savings would be $453.5 million.
For more information about the OregonSaves retirement program, go to www.oregonsaves.com.