Nearly half of America’s workforce is not covered by a workplace retirement plan. And workers are far less likely to save for retirement if they have to do it on their own. Moreover, when asked how they feel about their nest-eggs, a staggering 90% of American workers will tell you that they wish they had more saved. It has not been hard to see the looming retirement crisis.
But as States try to address the impending crisis by considering or introducing legislation to create State-run Retirement Plans, they often meet with opposition. Since these State initiatives began, financial services providers, among others, have expressed concerns that competition from public programs would eat into their market share. In many cases, we believe, this opposition has thwarted proposed legislation altogether.
As it turns out, these industry concerns appear to be unfounded. New research from the Pew Charitable Trusts suggests that State-run Retirement Programs may, in fact, be a catalyst for the adoption of private sector retirement plans. Pew analyzed several years of Form 5500 filings, and found that, in the three States that have launched public Auto-IRA Programs (California, Illinois and Oregon), there has been no detriment to private plans.
In fact, the proportion of new employer-sponsored plans held steady or increased after launch of the State-run Retirement Programs, and there was no uptick in termination of private plans. Moreover, according to a recent article in Pension & Investments, many private providers (including Guideline, Ubiquity, Betterment, Human Interest and SaveDay) are already reporting an increase in business from their private sector clients in response to the State initiatives.
We believe these early findings are encouraging and could prove to be valuable in the legislative process and ongoing outreach to the private sector. Although the Pew data is not what might be expected, it makes perfect sense. The mandatory nature of the Auto-IRA Programs available today in California, Illinois and Oregon means that the tens of millions of uncovered private sector workers must be offered a retirement plan by their employers. While mandatory State programs require covered businesses to offer a plan, they do not force businesses to choose the State-run option. Based on Pew’s data and industry anecdotes, we believe that when employers are required to act, they will choose from a menu that includes private alternatives to a State-run Retirement Program.
From our perspective, it appears that State initiatives can create opportunities for the private sector financial services firms. As more employers finally provide a retirement savings option – State-run or private – millions more people will be presented with a compelling workplace solution, which we know is the most effective way to save for their futures.
In our view, the bottom line is that State-run Retirement Programs provide the opportunity for employers to finally do the right thing. And – most important of all – they mean opportunity for struggling American workers. More savings, more security, and a better retirement for millions is a goal we can all agree upon.
 AARP Testimony Before the Senate Finance Committee, "Challenges in the Retirement System" May 14, 2019; U.S. Government Accountability Office, "Retirement Security: Federal Action Could Help State Efforts to Expand Private Sector Coverage,"
 Georgetown University Center for Retirement Initiatives, “Review of Potential Public Retirement Plan Options for Private Sector Employees/Employers in the State of Vermont,” January 4, 2017
 AARP, "2017 AARP Retirement Security National Survey of Employed Adults Ages 18-64," February 2017
 John Scott, "Availability of State Auto-IRAs Appears to Complement Private Market for Retirement Plans,” The Pew Charitable Trusts, June 17, 2021
 Margarida Correia, "Digital plan providers see opportunity in state mandates," Pensions & Investments, August 9, 2021