Many workers don't have access to retirement savings programs. That is changing.
Now, efforts on both a national and state level aim to give more individuals access to plans.
In December, Congress ushered in the Secure Act. Among the changes included in the legislation are new ways for small businesses to work together to offer 401(k) plans, called multiple-employer plans, or MEPs.
Meanwhile, a handful of states are putting automatic individual retirement accounts in place to give workers a way to save directly through their paychecks.
Both efforts come at a time when many individuals' retirement savings are woefully low. Working households with access to 401(k) plans typically have accumulated $111,000 retirement savings by ages 55 to 64, according to the Center for Retirement Research at Boston College. Lack of access to retirement savings plans is one of the biggest reasons those savings fall short, the center found.
The new plans aim to help solve that access problem, in part by reducing the financial burden to employers who provide them.
Multiple employer plans allow employers, even those from unrelated industries, to group together to participate in these programs that have lower costs and less administrative responsibilities.
Meanwhile, state auto-IRAs provide a way to automatically enroll workers in retirement plans, which are typically run by the state, not the employer.
California, Illinois and Oregon currently have programs in place. Other states, including Connecticut, New Jersey and Maryland, have passed legislation to create these plans.
Auto-IRA advocates hope that the states' examples could ultimately lead to the creation of a national program. Still, other experts wonder if the Secure Act changes could reduce the need for both plans.
"The automatic enrollment IRAs might still serve a group of people, but it would be significantly reduced, potentially by this change in the Secure Act," said Jamie Hopkins, director of retirement research at Carson Group and professor at Creighton University Heider College of Business.
The state IRAs are a good idea, Hopkins said. But one of the problems is the slow adoption they've had in the places where they are offered.
"We don't really have that groundswell of individuals clamoring for this," Hopkins said.
The Center for Retirement Research found that Oregon's program, which started in 2017, has an estimated 48% to 67% participation rate. It is unclear how many of those participants are actually using those funds for retirement or other savings, the research found.
But J. Mark Iwry, a non-resident senior fellow at the Brookings Institution and visiting scholar at the Wharton School, said opt-out rates should not be used as a measure of success for state-run IRAs.
For example, there are roughly 12 million workers in the states that now have auto-IRA programs who could be enrolled.
"If a third half of them opted out, we would have 8 million new savers," said Iwry, who also served as senior advisor to the Secretary of the Treasury in the Obama administration. "Even if half opted out, we would have 6 million new savers. That's huge."
There are approximately 55 million workers nationally who do not have access to workplace retirement plans.
And estimates say the Secure Act's multiple employer plans will lead to the creation of 600,000 to 700,000 new retirement accounts.
"There's no way the Secure Act comes close to solving the coverage gap in the United States," Iwry said. "But the act is a good, constructive and necessary step forward."
Admittedly, auto-IRAs have, at times, become a political issue.
Iwry, for instance, co-authored a proposal to create an automatic IRA. That idea was endorsed by both candidates — then-Sen. Barack Obama and Sen. John McCain — in the 2008 presidential election campaign.
When Obama was elected, he put it in his budget proposals during all eight years of his presidency. But Congress wasn't responsive once the Affordable Care Act passed.
"At that point, the Republican leadership expressed the determination to oppose President Obama's initiatives and make him a one-term president, so Obama's support became the kiss of death," Iwry said of the auto-IRA proposals.
Obama, as a result, encouraged the states to test the programs. The thinking was that, if they were successful, that could show proof of concept to Congress, Iwry said.
While the Secure Act will bring retirement savings access to more workers, a national auto-IRA program would come closer to solving the problem, according to Iwry.
"If we got auto-enrollment of 30 or 40 million of the roughly 55 million uncovered workers, and even if half of them opted out, it would be the greatest breakthrough in retirement savings coverage in the history of our nation," Iwry said.