Some employees and economists like it, and some employers don’t: Oregon is leading the way among states that are prodding private sector workers to automatically save for retirement through payroll deductions.
The lack of retirement savings among Americans is almost universally bemoaned, but nudging, prodding and lecturing have done little to build up nest eggs for old age. So some states say they are going to make it easier to save with a simple plan: an automatic payroll deduction for retirement savings.
Oregon is the first state to roll out a plan that covers private-sector workers who do not otherwise have access to a savings plan in their workplace. The deduction is an automatic 5 percent of gross pay, unless the worker opts out. Participants can reduce the percentage, if they choose. The state directs the money gathered under the OregonSaves plan to privately run low-cost investment funds.
With its heavy concentration of small businesses, Oregon calculates that it has more than 1 million workers whose employers do not offer a retirement-savings vehicle. Many small employers say they cannot afford the expense or time to set up such plans.
Luke Huffstutter, who co-owns a hair salon in Portland, was among them.
“I had looked into setting up an employee-savings plan. We met with four different companies, but the plans were either too expensive or the fees were too high,” said Huffstutter, who, with his wife, Natasha, owns Annastasia Salon.
When he heard about OregonSaves, the state’s pass-through savings plan, Huffstutter signed up right away. The program’s first phase began July 1, with 11 businesses participating, including the hair salon, a liquor store, a day-care center and a chocolate maker.
All employers who pay unemployment insurance for their workers are required to sign up by 2020 — about 60,000 workplaces and 600,000 workers.
“It’s genius because people are signed up and participate unless they actively decide they won’t,” Huffstutter said. Most of the salon’s three dozen stylists and other employees enrolled. They included Maria Rose Isaac, 26, the salon manager.
“I don’t have a retirement plan, but it was always on my mind,” said Isaac, who has worked at the salon for seven years. “This is the easiest, simplest way to have some savings.”
Worker reception has been more mixed elsewhere, including at S & S Sheetmetal, a family-owned air conditioning and heating…