SFRPs taking a hit during the pandemic? Despite concerns about how pandemic related un- and underemployment might increase withdrawals from state-facilitated retirement savings programs (SFRPs), contributions remained steady and withdrawals increased only slightly.

Since the beginning of 2021, I’ve noticed an uptick in media stories and marketing that highlight alternatives to State-Facilitated Retirement Savings Programs (SFRPs) such as CalSavers, Illinois Secure Choice and OregonSaves. One company in California, for example, describes its Pooled Employer Plan (PEP) 401(k)s as more suitable for highly compensated employees because unlike IRAs, 401(k)s allow for employer contributions and have higher annual employee contribution limits.

Determining the “default” investment for savers who do not make a decision about where to direct their contributions is a weighty decision. The downside of putting the money into investments that carry more risk, and a greater potential for loss, is obvious. But parking the contributions in a “safe” investment with lower risk means participants’ accounts may not grow sufficiently to provide significant income security in retirement. Increasingly, target-date funds (TDFs) have become a popular solution.