Over 50 million US private-sector employees currently lack access to a workplace retirement savings vehicle, such as a 401(k). This significant gap in retirement planning is being addressed by a growing number of states that are implementing mandatory "auto-IRA" programs. These initiatives require most private-sector employers, who do not already offer a retirement plan, to provide employees with individual retirement accounts featuring automatic payroll contributions.
The trend began in 2017 with Oregon leading the way. As of today, a total of 15 states have fully operational auto-IRA programs, with an additional two states actively in the implementation phase, according to data from The Pew Charitable Trusts. Furthermore, eight states are currently considering legislation this year to establish their own auto-IRA programs, indicating a widespread movement to bolster retirement security for workers.
Expanding Access: The Rise of State-Mandated Auto IRAs
The landscape of state-sponsored retirement savings has expanded considerably. States with active auto-IRA programs include California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island, Vermont, and Virginia. Looking ahead, Hawaii is anticipated to launch its program later this year, and Washington State is slated to introduce its initiative in 2027.
Beyond these operational and upcoming programs, several other states are exploring similar legislation. States with auto-IRA bills under consideration are Alabama, Indiana, Kansas, Massachusetts, Michigan, Pennsylvania, Tennessee, and West Virginia. This broad legislative interest underscores a national recognition of the need to provide accessible retirement savings options for a large segment of the workforce.
Significant Growth in Auto-IRA Assets
The financial impact of these state-led initiatives is becoming increasingly evident. As of January 31, the total assets held within nearly 1.2 million funded auto-IRA accounts reached $2.79 billion, according to the latest figures from the Georgetown Center for Retirement Initiatives. This substantial sum reflects contributions across 12 state programs, notably not yet including the three states that have launched their programs in recent months.
New York stands out as one of these recently launched programs, having opened its plan in October. Employers in New York face staggered registration deadlines: those with 30 or more employees must register by March 18; businesses with 15 to 29 employees have until May 15; and employers with 10 to 14 people must register by July 15. The only exemptions from New York's mandate apply to employers with fewer than 10 employees or those that have been in business for less than two years.
How Auto-IRAs Function and Future Benefits
State-based auto-IRAs are typically structured as Roth IRAs, meaning contributions are made with after-tax dollars, allowing for tax-free growth and withdrawals in retirement. Employers usually deduct a small percentage of an employee's paycheck, often 3% or 5%, and invest it in a target-date fund aligned with their anticipated retirement year. These contributions are designed to automatically increase by 1% of pay annually until they reach a state-defined cap, typically between 8% and 10%. Employees retain the flexibility to adjust their contribution rates or opt out entirely.
A significant advantage for employers is the minimal administrative burden and cost. There are generally no direct costs for employers to enroll workers, and matching contributions are not permitted within Roth IRAs. Crucially, employers are not saddled with fiduciary duty, which instead rests with a state board overseeing the program. Looking ahead, workers may qualify for a federal Saver’s Match starting in 2027, potentially providing up to $1,000 annually. This match, equal to half of contributions up to $2,000, will be deposited directly into the Roth IRA, replacing the current non-refundable tax credit and offering a more direct boost to savings for low- and moderate-income individuals.
