But Does It Actually Work?

By Joel Metlen

A few days ago, I was listening to a podcast about federal legislation that passed with bipartisan support about a decade ago and how no one had any idea if it actually achieved its intended outcomes. There were plenty of unintended, negative consequences, but no one - not even the primary sponsor of the legislation - could say one way or the other if it actually did the one thing it was designed to do. There is often fierce debate leading up to the enactment of new policy, but shouldn’t we also research and review policies after passage to determine their effectiveness, to help us improve them, learn lessons, and even potentially try different solutions if they don’t work?

State-sponsored retirement programs are a novel approach to helping solve the problem of the retirement savings gap. I saw the OregonSaves program, which I helped start up, as an important experiment, with the potential to help millions and also provide a wealth of information to inform subsequent retirement policy. In the absence of a federal approach, Oregon and other early adopters of the model could act as true laboratories of democracy. But like in any well-run experiment, we needed to actually measure and analyze the results, not just internally, but with the help of external, third-party research experts who could rigorously analyze the data and produce unbiased, professional conclusions.

There is, of course, always the risk that research experts will have negative findings. That risk is why many organizations are cautious about sharing access to their programs. In Oregon, openness and transparency were central to the way we designed and rolled out OregonSaves. We not only agreed to work with researchers interested in the program; we actively sought them out and helped coordinate their efforts to ensure they had equal access to all of the different data points they would need to test their hypotheses, while also ensuring the integrity of our systems and privacy protections for employers and employees. I personally worked hand-in-hand with researchers from AARP, Boston College, the Employee Benefit Research Institute, the University of Oregon, the Pew Charitable Trusts, Portland State University, and Wharton.

There were and still are a lot of hypotheses to test. Advocates and naysayers alike have had many questions about the impacts that state-sponsored retirement programs have on workers, employers, and the financial services industry. We spent a lot of time and effort looking at the existing research and similar models in other countries to try to predict the best approach to take with the OregonSaves program, but there was no way to know for sure if what worked for the Nest program in the UK, for example, would work as well in the United States.

It’s now been over three years since the first workers started saving through state-sponsored retirement programs, and because states took an open approach and provided access for researchers to do their important work, we’ve seen a steady stream of extremely interesting findings and reports come out.

Participation, savings rates, and withdrawals. One big question for states has been how many people will actually participate and save for retirement if given access to auto-enrollment IRAs, especially given that these programs are designed for people of lower socioeconomic status and in often high-turnover industries. So far, the research has been encouraging, showing that folks will and do take advantage of the opportunity in large numbers.

• “Auto-Enrollment Retirement Plans for the People: Choices and Outcomes in OregonSaves”

• “Optimal Default Retirement Saving Policies: Theory and Evidence from OregonSaves from OregonSaves” 

• “Participation and Pre-Retirement Withdrawals in Oregon’s Auto-IRA”

Savings during an economic downturn. Most of the state programs began during an economic boom, and it wasn’t clear what savers would do in a bear market. The good news is that it appears most folks stayed the course and kept on saving.

• “Oregon State Retirement Program Growing During Pandemic—Despite Some Worker Withdrawals”

Impact on employer-sponsored retirement plans. Many in the financial services industry feared that state programs would incentivize employers to drop employer-sponsored plans or create unfair competition with the private sector. Based on the research so far, it appears that state plans actually complement the private market, rather than take away from it.

“Availability of State Auto-IRAs Appears to Complement Private Market for Retirement Plans” 

Program rollout. How fast should states roll out programs like these? Oregon split its rollout into phases over multiple years, to ensure folks had enough time prepare. The research so far suggests a quicker roll out would be more beneficial to allow folks to start saving sooner.

• “Auto-Ira Rollout Gradually Speeding Up”

The impact on employers. One major concern has been that these programs would be a burden for employers. States spent a lot of time and effort to minimize the effort required for employers, to ensure as much benefit and positive outcomes, and the research seems to validate that approach.

• “Employers Embrace State Programs That Automatically Enroll Private Sector Workers in IRAs”

• “Employers Express Satisfaction With New Oregon Retirement Savings Program”

• “Is the OregonSaves Retirement Program Expensive for Employers”

This is just a sampling of some of the research findings to date, and the good news is that there is plenty more still in the works, as states continue to gather larger data sets and more programs get up and running. This information is also helping facilitate better informed discussions about retirement policy in states around the country as well as at the federal level. I for one am excited to keep seeing the results and learning new insights, so that we can figure out the best ways to help more and more folks save.

Until next time! - Joel

Columnist and Senior Associate Joel Metlen is based in Oregon. Joel is a pioneer of the state facilitated retirement savings space, woven into a career of public service and innovation. At OregonSaves, Joel’s responsibilities ranged from marketing and employer engagement to operations and data analysis. You’ll see his insights from that experience, and more, here.

This piece was featured in the July 15, 2021 edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.