More Employers Offer Their Own Retirement Plans in Wake of State Auto-IRA Mandates

More than 40 million full-time private sector workers in the U.S. lacked access to employer-provided retirement plans in 2024, but state mandate laws may be helping to reduce those figures.

As of December 2025, 20 states and two cities have enacted laws requiring private sector employers to either offer their own retirement plans or enroll their workers in a state-facilitated retirement program. Of the state programs, 17 offer automatic individual retirement accounts. In response, firms in states with a mandate have begun offering their own plans more often than they have chosen to participate in state auto-IRAs, according to new research published by the Center for Retirement Research at Boston College.

It is a “puzzle” why employers are choosing “the more expensive way to comply with the law,” says Sita Slavov, a professor of public policy in the Schar School of Policy and Government at George Mason University and a co-author of the CRR brief, “How Do State Auto-IRAs Affect Adoption of Employer Plans?” “We really don’t have a good answer.”

Unpacking Employers’ Choices

The CRR’s research examined auto-IRA adoption in California, Connecticut, Oregon and Illinois—the four earliest adopters of auto-IRAs—which held more than 80% of total auto-IRA assets as of December 2025. As of November 30, 2025, more than 1 million workers had saved $2.63 billion in state auto-IRA programs, according to data from the Center for Retirement Initiatives at the Georgetown University McCourt School of Public Policy.

According to the CRR study, the share of firms offering their own retirement plans increased between 5.7 and 8.7 percentage points more than same-sized firms in states without auto-IRAs, when considering the period between two years before and two years after the programs’ start.

“Firms are typically assumed to offer their own retirement plans when it is in their interest to do so,” authors wrote in the CRR brief. “So, it is plausible that most firms that found it valuable to offer their own plan before the mandate would continue to do so instead of switching to a state auto-IRA program.”

As for the more puzzling trend, Slavov says the costs a firm incurs by offering its own retirement plan likely exceed those of “simply facilitating payroll deductions,” as the state plans require. She explains that recordkeepers may have helped drive the uptick in employer plan adoption, as they had an opportunity to market their products to employers in the wake of state mandates. Alternatively, the mandates could have nudged smaller employers—those least likely to offer plans and therefore most impacted by the policies—to do their research and consider offering their own plans.

Tim Friday, president and CEO of American Trust Custody, has advocated for advisers to use state mandates as an opportunity to prompt conversation with business owners about starting a company plan.

“These practitioners should be connecting with businesses to let them know they have two choices when it comes to giving their employees access to a qualified retirement plan,” Friday wrote in a commentary for PLANADVISER. “They can either form their own, understanding that, yes, it’s going to cost time and money to administer, or they can be compelled into supporting a mandated plan that may not suit their needs, nor provide them with the boons associated with offering an employer-sponsored option: no tax benefits, no recruiting tool, no control.”

The CRR research raised several other reasons why firms would adopt their own plans, including:

• “Employers might find the administrative burden of auto-IRAs higher than an employer plan, which they can offload to a paid third-party;
• Some workers value, and thus advocate for, an employer plan over the auto-IRA because of higher contribution limits or the ability to have an employer match; and
• Employees dislike the auto-enrollment feature of auto-IRAs and advocate instead for an employer plan without this feature.”

However, the authors concluded that there is no “compelling evidence” that the “rational” reasons raised in the brief play a substantial part in the trend. Instead, the CRR suggested the behavioral factors Slavov names are more probable—with a caveat that more research is needed.

Days after Representative Richard Neal, D-Massachusetts, reintroduced legislation that would require a federal auto-IRA option for employers with at least 10 employees, Slavov says she would expect the results that are happening on a state-wide basis to happen nationally.

“What’s clear from the data is that [employers] are doing it,” says Slavov. “There’s been a lot of research on what factors cause employees to participate in these plans. I think it’s … [less] understood what causes firms to offer them.”

Options for Small Businesses

Experts have argued that for small businesses especially, pooled employer plans provide distinct advantages to state-run IRAs. PEPs, established under the Setting Every Community Up for Retirement Enhancement Act of 2019, allow multiple employers to join together in a single retirement plan, pooling administrative resources and costs.

Michael Salerno, founder and CEO of the National Professional Planning Group, told PLANADVISER in November 2024 that PEPs “allow a much greater outsource of administrative function and liability” and provide “additional administrative efficiencies that have not typically been seen in the state-run plans.” He added that PEPs can also provide financial wellness and managed account availability that is often missing from state-run plans.

Holly Verdeyen, a partner in and U.S. defined contribution leader at Mercer, has said in the past that state mandates raise awareness and demand for PEPs.

“[PEPs] present a compelling alternative to state-run plans, as [they] are generally more sophisticated and can potentially reduce investment fees through economies of scale,” Verdeyen told PLANADVISER in 2024. “Additionally, employer incentives to offer a retirement saving plan have increased with the SECURE 2.0 legislation.”

SECURE 2.0 allows businesses with up to 50 employees to claim tax credits covering 100% of ordinary and necessary out-of-pocket costs associated with offering a retirement plan for the first three years a business offers its plan. Employers with 51 to 100 employees receive 50% coverage.