Retirement Pew national survey provides support for Oregon effort toward saving
A new report by the Pew Charitable Trusts lends support to Oregon and other states seeking to expand the ability of private-sector workers to save for retirement.
The report, released Jan. 13, said about 30 million full-time US workers 200,000 of them in Oregon lack access to a plan through work. An earlier Oregon report sets a higher number, but both agree that about half of Oregons private-sector workforce has no access to plans at work and few sign up for plans on their own.
Nationally, the Pew report said 58 percent of full-time private-sector workers have access to a plan, and 49 percent of workers overall participate. The comparable numbers for Oregon are slightly higher: 64 percent with access and 55 percent overall participation by workers. When a plan is available at work in Oregon, 86 percent choose to participate.
Financial security is vital to the quality of life for every Oregonian and the Oregon Retirement Savings Plan will allow more than 600,000 people to start saving through their place of employment, said state Treasurer Ted Wheeler, who has led a three-year effort to craft a state-sponsored plan. Thats good for all of us for workers, for employers and even for taxpayers, because todays lack of adequate savings could put a heavy strain on already-frayed public services.
Oregon is among a handful of states, including California and Illinois, now crafting a state-sponsored plan. Other states are exploring options and Washington has set up a marketplace that allows shopping for plans by self-employed and other workers. Massachusetts has a plan for employees of nonprofit groups.
We are not recommending any particular policy initiative. This research provides facts for policymakers as they consider these different options, said John Scott, director of retirement savings at the Pew Trusts. However, providing access for workers is key to boosting retirement savings. Most workers will participate in a retirement plan if given a chance. But many workers will still not participate even if offered a retirement plan, so employers and policymakers need to consider ways to boost participation.
Oregon and other states are looking at some form of individual retirement accounts or other defined-contribution plan, such as a 401(k), under which workers are automatically enrolled unless they choose to opt out. The savings plan would be available only to workers whose employers do not offer one now. Employers would not be required to contribute to the plans, only to allow for payroll deductions by employees.
Oregons plan is scheduled to start up in mid-2017. Lawmakers authorized it last year after a study was completed in 2014.
At a recent meeting of the Oregon Retirement Savings Board, led by Wheeler, members heard not only from experts in Oregon but about similar efforts in California and Connecticut. The board is forming work groups and has put out a call for proposals.
There is going to be a lot of learning that goes on from state to state, Pews Scott said. But as policymakers are developing their initiatives, they have to keep in mind that they have particular needs and characteristics that have to be reflected in their policy development.
The federal government also has taken steps to broaden access to retirement savings plans through a new program called myRA – although there is a $15,000 cap on the amount of savings – and a pending Department of Labor rule to ensure that state-sponsored plans do not conflict with a 1974 federal law governing pensions.
Although such plans constitute most of the personal savings accumulated to supplement Social Security benefits in retirement, the Pew report said access and participation to them are inconsistent across the nation.
Wisconsin ranked highest among the states with access by 70 percent of private-sector workers and participation by 61 percent. Florida ranked lowest with access by 46 percent and participation by 38 percent. The US medians half the states above and half below the numbers are 62 percent access and 53 percent participation.
The numbers are higher in New England, the Midwest and parts of the Northwest, and lower in the South and West.
The fact that we see wide variation across the states suggests a need to understand what is going on at the state level, Scott said.
The report said access and participation are influenced by several factors:
Size of business: Just 19 percent of workers employed at businesses of 10 or fewer have access to a plan, and 23 percent participate. On the other hand, 73 percent of workers at businesses of 500 or more have access, and 82 percent participate. The report also said Oregon has the 15th highest share of workers employed by businesses of fewer than 50.
Setting up and administering a plan can be an obstacle, particularly for smaller firms that might be newer or face more uncertainty, said Kevin Whitman, a senior research officer with the project.
Industry: Manufacturers (69 percent) are far more likely to offer plans than the leisure and hospitality sector at 34 percent and construction at 40 percent.
Race/ethnicity: Whites are more likely to have access to and participate in plans (63 percent, 55 percent). Minority-group access and participation are below those figures, but the largest disparity is with Hispanics, at 38 percent access and 30 percent participation.
Whitman said many minority-group workers have lower earnings and are more likely employed in jobs that do not offer plans. He also said many are unfamiliar with or distrust financial institutions.
Age: Younger workers (18-29) are less likely to have access to plans at work (47 percent) or to participate (34 percent). For the oldest workers (45-64), access is 63 percent, overall participation 57 percent.
Income: Workers earning less than $25,000 annually report only 32 percent access and 20 percent participation in plans. For those earning more than $100,000, 75 percent report access and 72 percent participation.
Education: Those without a high school diploma are the least likely to have access (29 percent) and participate (21 percent). Workers with at least a bachelors degree are likely to have access (69 percent) and participate (62 percent).
Gender: Men and women working full time have access to plans and participate at similar rates. But Whitman said women need to have more savings because their life expectancy is longer, they are more likely to have part-time jobs that have no access to plans, and they are more likely to be out of the workforce longer than men.