How Do Firms Respond to State Retirement Plan Mandates?
This paper investigates the effect of state retirement plan mandates on the supply of employer-sponsored retirement plans (ESRPs) by firms. These policies require employers to either (1) offer ESRPs to workers or (2) facilitate automatic payroll deductions that are deposited into individual retirement accounts (IRAs) established for workers by the state. In this paper, we utilize individual-level data from the Current Population Survey (CPS) and firm-level data from Form 5500 filings to examine the effect of these automatic-enrollment IRA (“auto-IRA”) policies on employer decisions to offer, and worker inclusion in, ESRPs. We exploit variation in the timing of implementation across states and firm size categories and estimate that auto-IRA policies increase the probability that an individual works for a firm with an ESRP by roughly 3 percent, and the probability that the individual participates in that ESRP by around 7 percent. These policies also increase the number of ESRP participants at the average firm in our sample by 3-5 percent.
We greatly appreciate feedback from audiences at the Association for Public Policy Analysis and Management (APPAM) Annual Research Conference; the RAND Behavioral Finance (BeFi) Conference; the Boulder Summer Conference in Consumer Financial Decision Making (CFDM); the U.S. Department of Labor (DOL); the U.S. Securities and Exchange Commission (SEC); and the U.S. Senate Committee on Health, Education, Labor, and Pensions (HELP). We are also grateful for helpful comments from Kim Olsen, Anthony Orlando, Jill Jones, Manita Rao, and Ngoc Dao. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research, World Bank, FDIC, or the U.S. Government.
January-May 2022, I received a $2500 grant from Brown University (Watson Institute Research and Internship Grant) to cover living expenses in DC while I interned at the SEC working on "How Do Firms Respond to State Retirement Plan Mandates?"
- In 2017, Oregon became the first state to implement an auto-enrollment Individual Retirement Account (IRA) program. Illinois and...