Maine and Colorado have forged a new partnership to make it easier, faster and more cost-effective for workers in Maine to save for retirement, a first-in-the-nation kind of pact that experts hope other small states will follow.
Under the program, the Maine Retirement Investment Trust, or MERIT, partnered with the Colorado SecureSavings Program to create a state-run retirement savings program in Maine.
The move will give 200,000 workers in Maine, who lack retirement saving plans through their employers, a chance to save for retirement on their own. About 40% of Maine’s private-sector workers lack access to an employer-sponsored retirement plan. This retirement savings plan is tied to the employee instead of the employer, allowing the account to move with the worker from job to job.
“The partnership with Colorado will help other states that are small like Maine offer these services without facing all the challenges alone,” said Angela Antonelli, executive director for the Center for Retirement Initiatives at Georgetown University. “It will make it economical and faster for Maine to offer this.”
This new type of partnership will also help Maine launch its pilot program faster, beginning this fall, with full rollout in 2024.
“It will show other states that there’s an option and help them to more easily work with other states and see that there’s an easier path forward,” Antonelli said.
She expects more states to offer programs to help the 57 million workers nationally who lack workplace-related retirement savings plans.
“State leaders are understanding the tremendous cost to government and taxpayers if these people retire into poverty,” Antonelli said. “These state programs help workers today have access to a way to save and begin to have the hope of retirement. There’s an enormous cost of doing nothing.”
Currently, 19 states have retirement programs that have had a “tremendous” amount of success, with about 70% of those who are auto-enrolled choosing to save, Antonelli said. The remaining 30% opt out of the programs for various reasons such as the inability to save at this time due to paying off debt or some other reason, Antonelli said.
These 19 state-run programs had over $1 billion in assets administered as of July 31, Antonelli said.
With the success of the state-run retirement savings programs in states such as California, Illinois, and Oregon, the Colorado and Maine partnership represents the next step in having low-cost, portable retirement savings options available to workers.
“Workers in every state want a free and easy way to save so they can retire with dignity. Partnering with Colorado we will share costs, create scale, and tailor a retirement savings program to meet the needs of Mainers,” said Henry Beck, Maine state treasurer. “Our first-of-its-kind partnership benefits all of us and makes it easy for everyone to automatically save for their retirement at work.”
JP Aubry, associate director of the state and local research at the Center for Retirement Research at Boston College (CRR), said it has been difficult to entice the private sector to serve small states with limited populations and workers with typically small savings balances. Having a partnership like Maine and Colorado makes the potential pool of customers larger and reduces the costs.
“It could be advantageous for other small states to do this,” Aubry said.
“We are looking forward to working closely with Maine in providing a high quality, accessible retirement option to savers in our states. As more states adopt programs, it is imperative that smaller states are confident in their ability to provide a cost effective choice,” said Hunter Railey, director of the Colorado SecureSavings Program.
Vestwell, in partnership with BNY Mellon, will provide administrative services for the program in Colorado and Maine. Vestwell currently serves as the vendor for Colorado’s SecureSavings program, and administers state-run plans in states such as Oregon, Maryland, and Connecticut.