All of the States That Set Up Automatic IRAs for Workers
Several states have enacted automatic worker contributions to individual retirement accounts (IRAs). To ensure their residents have a path to financial security in retirement by providing a simple, low-cost way for workers to invest in their futures.
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According to the Pew Charitable Trusts, state auto-IRAs have helped more than 800,000 workers save over $1 billion in retirement assets since 2017.
Auto-IRAs have provided a way for workers whose employers don’t offer a workplace retirement savings plan, self-employed individuals, and others who want an uncomplicated way to save money for their retirement.
The concept isn’t new. As Georgetown University’s McCourt School of Public Policy noted, since 2015, plenty of states have created voluntary payroll deduction IRA plans, multiple employer plans (MEPs) and Health Insurance Marketplace plans.
As of January 2024, 15 states have some automatic IRA programs in progress, but only eight have active programs, per USA Today.
Benefits of Automatic IRAs for Workers
Opponents would rather see employees open their retirement accounts without having part of their earnings automatically siphoned into IRAs. Supporters of auto-IRA plans would, too, but most workers who aren’t enrolled in a company 401(k) don’t take the initiative on their own.
“You’re 15 times more likely to save for retirement if you have the option to save at work through payroll deduction,” said Kim Olson, a senior officer at the Pew Charitable Trusts. “If you have to do this on your own, the chances are very low that you’ll follow through.”
State-enacted auto-IRA plans are voluntary so an employee can stay enrolled automatically or opt-out. Workers who are wary of joining can always rejoin the auto-IRA plan at a future date. For those who choose to participate, there are several benefits:
State-legislated, employer-facilitated, and privately-administered auto-IRAs are retirement investment plans that require little effort from the employee and at no cost.
Once your employer registers for the program, workers are automatically enrolled at a default contribution rate (5% seems to be the norm). Some plans have customizable contributions to meet the needs of their employees.
Importantly, the state savings plans are portable. If you change jobs, your money and IRA account go with you.
Retirement savings accounts are set up as Roth IRAs, which offer several benefits, including tax-free growth, tax-free withdrawals in retirement and no required minimum distributions (RMDs).
States That Have Auto-IRA Plans
Oregon was the first state to pilot an auto-IRA program in 2017. Seven other states have followed suit since, including Maine, which created its Maine Retirement Investment Trust (MERIT) program for the roughly 200,000 employees with no retirement savings plan.
Here are the eight states that have set up automatic IRAs for its workers:
California – CalSavers
Colorado – Colorado SecureSavings
Connecticut – MyCTSavings
Info: https://myctsavings.com/
Illinois – Illinois Secure Choice
Maine – Maine Retirement Investment Trust (MERIT)
Info: https://meritsaves.org/
Maryland – Maryland$aves
Oregon – OregonSaves
Virginia – RetirePath Virginia
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