Taking Stock of the Saver’s Match: The Promise and The Challenges

By Thomas Hawkins | June 21, 2024

Taking Stock of the SMWhen provisions of SECURE 2.0 were signed into law in December 2022, the clock started ticking on one of its most consequential retirement savings public policy initiatives – the Saver’s Match.
Slated to begin operation with the 2027 tax year, both the promise and the challenges of the Saver’s Match program are coming more sharply into focus. While research is still ongoing, the picture being revealed is one of massive potential to increase retirement savings and to help close the minority wealth gap.

However, these benefits may not come easily. Given the sheer size of the population affected by the Saver’s Match, its timing and other unique characteristics, the program could face challenges in getting up-to-speed and in handling millions of annual transactions for a highly mobile workforce.

At the Annual iOme Challenge Forum, held on 6/20/24 by the Women’s Institute for a Secure Retirement (WISER), a panel anchored by Morningstar’s Director, Retirement Studies and Public Policy Jack VanDerhei, along with Retirement Clearinghouse and Portability Services Network President and CEO Spencer Williams, these four themes were addressed.

1. The Saver’s Match is Going to be Big
In the Employee Benefits Research Institute’s (EBRI) Issue Brief No. 602 (Sizing the Market for the Saver’s Match, Feb. 2024), EBRI identified a total of 21.9 million savers who, based on 2018 tax data, would have been eligible to receive a federal matching contribution based upon their income, tax filling status and retirement plan contributions. Of those 21.9 million eligible savers, almost 9 of 10 were eligible by virtue of their contributions to a workplace retirement plan, with the remainder due to traditional or Roth IRA contributions.

Given an expanding universe of employer-sponsored plans as well as the rise of state-based auto IRAs, these figures are likely to understate the actual volumes that the Saver’s Match program could experience when it goes live.

2. The Saver’s Match Will Positively Shape Savings Behaviors
In an April 2024 survey (How the Saver’s Match Could Promote Financial Inclusion) conducted by Boston Research Technologies (BRT) and Retirement Clearinghouse (RCH), it was clear that a hard dollar federal matching contribution could incentivize increased savings by those already eligible for the match, as well as increased participation by those not presently participating or contributing to a plan. Combining the survey’s responses with EBRI sizing data, the authors estimated that an additional 8.5 million savers could be added from the ranks of non-savers, reflecting the powerful, positive behavioral effect that the Saver’s Match could have.

3. The Saver’s Match Will Disproportionately Benefit Minorities
That same BRT-RCH survey further found that eligible Black and Hispanic savers will be over-represented vs. their general plan participation levels, tend to be younger and have lower incomes and retirement savings account balances than their White counterparts, indicating that they will derive disproportional benefit from the Saver’s Match program.

Importantly, VanDerhei’s research for the Collaborative for Equitable Retirement Savings (CFERS), comprised of Morningstar, The Aspen Institute’s Financial Security Program and DCIIA, projects that the Saver’s Match could be highly effective in mitigating race & gender disparities in 401(k) plans, projecting significant increases in account balance/salary ratios for minorities and for women, with the largest increases projected for Black and Hispanic women.

4. The Saver’s Match Program Could Face Challenges
Considering the sheer size of the Saver’s Match program, along with the fact that the volumes would be experienced on an annual basis, it is not hard to imagine the operational challenges associated with these volumes.

In his presentation to the WISER audience, RCH’s Williams analyzed the impact that a highly mobile workforce, combined with plan-driven changes could have on the 18.9 million eligible savers contributing to a workplace plan. Williams’ figures suggest that, by tax filing time, over one-third (7.2 million) could have left their plan or find themselves impacted by a plan-driven change (ex. – change of service provider, plan termination).

Sharpening Our Focus
Research is ongoing to better understand the magnitude of public policy benefits that the Saver’s Match will deliver and how these benefits will accrue to under-served and under-saved populations represented by minorities, lower-income segments, and women.

EBRI, Morningstar/CFERS and others will likely be adding to our knowledge base on the Saver’s Match and helping to sharpen our focus on this vitally important retirement savings public policy initiative.