OregonSaves, the state-run program that provides Beaver State employees with retirement benefits if their employers don’t, was the first such program to begin operating in the United States. A recent study evaluated its effectiveness, and researchers have good news for its advocates.
In “Understanding Default Retirement Plan Behavior: The Case of OregonSavesa study conducted by the Michigan Retirement Disability Research Center at the University of Michigan, four researchers analyzed participation choices, account balances, and money going in and out of the program by reviewing program administrative records covering the period August 2018 to April 2020. The researchers were John Chalmers, Abbott Keller Professor of Finance, University of Oregon; Olivia S. Mitchell, professor at the International Foundation of Employee Benefit Plans, University of Pennsylvania; Jonathan Reuter, associate professor of finance, Boston College; and Mingli Zhong, PhD student in applied economics, University of Pennsylvania.
OregonSaves Employer Registration came in waves. The rolling enrollment deadlines were November 15, 2017 for employers with 50 or more employees, December 15, 2018 for those with 20-49 employees, May 15, 2019 for those with 10-19, and November 15, 2019 for those with five to nine employees. Employers with four or fewer employees will need to register in 2022.
Registrations and assets reflect the growing pool of employers and employees covered by the registration requirements. As of June 1, 2018, just over six months after employers with 50 or more employees were required to register, 954 employers had registered and OregonSaves assets totaled more than $3.5 million. . As of June 1, 2021, more than six months after employers with five or more employees registered, 16,919 employers had registered and OregonSaves assets totaled $113,149,423.
The Michigan study indicates that for small and medium-sized businesses that participate in OregonSaves, estimated average after-tax earnings are $2,365 per month. The typical participating employee, according to the researchers, works in a low-wage, high-turnover industry. Turnover rates, they say, are 38.2% per year, and employee turnover was highest among younger employees.
As of April 2020, 67,731 OregonSaves accounts — containing just over $51 million — had positive account balances, researchers found. The average balance, they say, was $754, but with considerable variation; younger workers accumulated the least assets due to their higher turnover. The researchers say that 34.3% of employees had positive account balances in April 2020, and that this “compared to the marginal increase in participation in large private sector companies”.
OregonSaves is especially beneficial for people with low incomes, according to the study. The researchers found that assuming an employee has a steady job, the implied average annual after-tax income of a participating employee is $28,378, just over half the national average of $54,129. .
The program allows employees to opt out and, according to the researchers, they benefit from it. They say that in April 2020, the implied participation rate was 59.5%. According to the study, employees of larger companies were less likely to abstain – and perhaps an encouraging sign, younger employees are also less likely to do so.
“Overall,” the researchers write, “we conclude that OregonSaves significantly increased employee savings by reducing search costs.”