Why Do Employers Establish Retirement Savings Plans? Evidence from State “Auto-IRA” Policies

Adam Bloomfield, Lucas Goodman, Manita Rao and Sita Slavov

No 32817, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Several states have recently attempted to boost retirement saving by adopting “auto-IRA” policies that require employers not currently offering an employer-sponsored retirement plan (ESRP) to either (1) establish an ESRP or (2) enroll employees in state-facilitated Individual Retirement Accounts (IRAs). We identify the effect of these state retirement plan mandates on firm decisions to offer ESRPs, treating the gradual rollout of these policies across states and employer size categories as a series of “experiments.” Using U.S. tax microdata, we estimate that at least 30,000 firms have been induced to offer an ESRP by these policies, although there is substantial heterogeneity in these effects across firm and worker characteristics. This effect is large considering that, for employers, establishing and maintaining an ESRP is more costly than utilizing the state-facilitated IRAs. We explore both rational and behavioral explanations for why firms might choose the higher-cost approach to complying with auto-IRA policies.

JEL-codes: D14 H75 J26 J32 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-age and nep-lma
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