Today, roughly one-third of U.S. households arrive at retirement completely reliant on Social Security. The reason is simple: at any given time, about half of private sector workers do not have access to an employer-sponsored retirement plan; and very few workers save for retirement outside of these plans.1 In general, these workers are more likely to be lower income, non-White, and female.

In Massachusetts, which has a slightly lower share of uncovered workers than the national average, about 1.6 million private sector workers do not have a retirement plan through work. Of those, 1.1 million are with an employer that does not offer a plan. Given this large coverage gap, the recently proposed state auto-IRA program for Massachusetts offers an opportunity to improve retirement security for many employees while minimizing the responsibilities of participating employers. Importantly, the proposed program follows most other states by requiring most employers without a retirement plan to automatically enroll their employees in the state program.

Ultimately, for an auto-IRA program to be viable it must provide enough revenue to attract a third-party administrator (TPA) and be fiscally sustainable for the Commonwealth. The experience of three large state auto-IRA programs – California, Illinois, and Oregon – can help anchor expectations in Massachusetts. Based on the enrollment experience of these plans, an auto-IRA program in Massachusetts would result in retirement accounts for over 400,000 uncovered workers in the Commonwealth within five years and more than 600,000 in fifteen years. Additionally, with a typical contribution and fee structure (that is, employee contributions that start at 4 percent of salary and increase 1 percentage point per year until reaching 8 percent and account fees equal to about $24 per year), the program would be cash-flow positive to the Commonwealth and the TPA in about 5 years (recouping startup costs within a year or two more). As such, an auto-IRA program would be financially viable in Massachusetts and could substantially reduce the share of workers without retirement savings in the state.

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