This year the Legislature passed, and the governor signed, ESSB 6069. The legislation establishes “Washington Saves,” an “automatic enrollment individual retirement savings account program.”

Under the program, employees will be allowed to contribute to an IRA that is facilitated by the state through automatic payroll deductions. For employees of covered employers, enrollment will be automatic, but employees will be allowed to opt out at any time. Similarly, employees will be enrolled at the default contribution rate, but the rate may be modified by the employee at any time. An employee’s individual account will be portable.

Covered employers will have to register with Washington Saves and either participate in Washington Saves or automatically enroll employees in a retirement plan through a trade association or chamber of commerce. Employers will be required to remit employee contributions to the program. The bill specifies, “the employers’ role in the program is solely ministerial” and “employers are not fiduciaries.”

A “covered employer” is defined as an employer that has been in business in Washington for at least two years, maintains a physical presence, does not offer a qualified retirement plan to employees who have worked there for at least a year, and employs workers working a combined 10,400 hours a year (e.g., at least five full-time employees).

Many program details are left to be determined by the governing board, which will begin meeting in 2025. The program must launch by July 1, 2027, but the governing board may choose to phase in the implementation (e.g., by employer size). The default contribution rate must be between 3% and 7% of wages, but it will be set by the governing board. The governing board will contract with private companies to manage the investments.

The 2024 supplemental operating budget appropriates $463,000 to implement the bill. There is no fiscal note for the version of the bill that was enacted, but based on fiscal notes for earlier versions, it looks like the cost to the state would increase to about $1.6 million in 2025–27. (That would be offset to some extent by administrative fees, but the fiscal notes do not include estimates of those.)

This isn’t Washington’s first foray into trying to help individuals save for retirement.

The state’s small business retirement marketplace was established in 2015 and launched in 2018. As a 2020 report to the Legislature describes it, the marketplace is essentially a website that “offers individuals and small businesses a way to compare and shop for low-cost, easy-to-manage retirement plans.” According to the 2020 report, the marketplace offered nine plans through three companies, 16 employers had enrolled a total of 96 employees, and 23 individuals had opened accounts. The 2022 report to the Legislature noted that the number of providers had dropped to two, offering five plans. It did not include any information on enrollments through the marketplace. (ESSB 6069 amends the small business retirement marketplace statute to allow all employers to participate, instead of just those with fewer than 100 employees.)

Then, a proviso in the 2023–25 biennial budget required Commerce to study retirement preparedness. That study was completed by Pew Charitable Trusts and submitted to the Legislature in December 2023. Pew recommended an automated savings program—like the one ultimately enacted in ESSB 6069—as the best approach to improving retirement security. Similar programs have been adopted by 15 other states and are operational in seven. Pew noted that Washington’s marketplace (the only one in the country) “has had limited reach.”

Pew estimated that an automated savings program in Washington, when it has been active for seven years, would generate 367,900 funded accounts and $2.5 billion in assets for the account owners. Pew also estimated that fees paid to the state would exceed state costs by the fourth year of the program, and the program would “be able to recoup all startup and ongoing operating costs” in the seventh year.

Finally, Pew did some listening sessions with businesses and notes, “there was confusion between how an automated savings program would work compared to other programs, most specifically Washington’s long term care benefits.” The program in ESSB 6069 is quite different from the long-term care program. Under the auto-enrollment retirement program, employees may choose to contribute their own money to a savings account that they own. Under the long-term care program, employees are required to pay a tax that funds a social program, and the amount of benefits a particular person might eventually qualify for has no relation to the amount he paid in payroll taxes.