State-run retirement savings programs for private-sector workers could be encouraging employers to launch their own plans, according to an analysis of Form 5500 filings conducted by Pew Charitable Trusts.
The non-profit found that in Illinois, Oregon and California — the three states that have begun enrolling private-sector workers into their auto-IRA retirement programs — employers with retirement plans continue to offer them and those without plans are adopting new ones at similar or higher rates than before the state programs started.
New plans as a percentage of existing plans nationwide climbed 2 percentage points to nearly 8% in 2019 from roughly 6% in 2013 when state-run retirement programs were not around, Pew found in its analysis.
New plan formation in Illinois, Oregon and California showed a similar trend with the proportion of new plans holding steady or increasing in each. In 2019, new plans in Oregon and California grew by 10% and 9%, respectively, posting some of the highest proportions of new plan adoptions. In Illinois, new plans as a percentage of existing plans grew by 7%, slightly lower than the national average.
"This early evidence from California, Oregon and Illinois indicates that auto-IRAs appear to complement the private-sector market for retirement plans such as 401(k)s," wrote John Scott, director of Pew's retirement savings project, in the analysis.
The findings are consistent with the results of a national survey of small-business owners that Pew published in 2017. Roughly half (51%) of small and midsize employers in that survey said they would start their own plan rather than enroll workers in a state-sponsored retirement program.
The most recent analysis is based on 654,584 retirement plan Form 5500 filings from 2013 to 2019.
