When the Vermont Saves Program (S.135/Act 43 2023)was introduced, the focus was on automatic enrollment and employer compliance. The larger financial question — how the program sustains itself — received less attention. Recent committee testimony and budget documents now give us enough data to evaluate the basic math.
Vermont Saves is structured as an automatic payroll-deduction Roth IRA program for workers whose employers do not offer a retirement plan. Employees are enrolled by default and may opt out. Contributions go into individual IRAs managed by a contracted private administrator, not the State of Vermont itself.
The financial question is not about who invests the funds. It is about whether the program’s administrative structure can support itself without ongoing public subsidy.
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Current Scale
According to the Treasurer’s FY2027 budget presentation:
- 5,420 funded accounts
- $5,172,939 in total assets
- Projected FY2027 operating expenses: $300,000
- Projected FY2027 fee revenue: $57,631
That leaves a projected shortfall of approximately $242,369 for FY2027.
Dividing projected fee revenue by funded accounts yields roughly $10.63 per funded account in annual revenue at current scale.
This is an early-stage number. The published fee structure includes approximately $26 per year in fixed account fees plus a 0.32% asset-based fee. At today’s average balance of about $954 per account, that asset-based fee is only about $3 annually. In steady-state conditions, an account could generate roughly $29 per year in total fees. However, the FY2027 projection indicates that ramp-up timing and account growth mean actual revenue is currently much lower.
Break-Even Analysis
If annual program expenses remain around $300,000, how many funded accounts would be required to eliminate the shortfall?
Using current projected revenue per account (~$10.63):
$300,000 ÷ $10.63 ≈ 28,200 funded accounts.
Using a more mature revenue estimate (~$29 per account annually):
$300,000 ÷ $29 ≈ 10,300 funded accounts.
This suggests that Vermont Saves likely needs somewhere between 10,000 and 15,000 sustained, fee-paying accounts — with growing balances — to cover annual administrative costs without outside support.
At present, with 5,420 funded accounts, the program would need to roughly double or triple in size to reach operational break-even.
The $300,000 Bridge
To cover the near-term gap, lawmakers have discussed redirecting up to $300,000 annually from certain small-dollar unclaimed property transfers. Currently, unclaimed property under a specified threshold and older than ten years is transferred into the Higher Education Endowment Trust Fund.
Under the proposal, up to $300,000 per year from that transfer stream could instead be directed toward the Vermont Retirement Security Fund, which supports Vermont Saves administration.
This is not a loan. Funds redirected in a given year would not be repaid to the Higher Education Trust. Instead, future transfer flows would revert once the retirement program no longer requires the support.
That distinction matters. Each year of diversion represents both a lost principal inflow to the Higher Education Trust and the investment earnings that principal might have generated.
Who Pays?
Vermont Saves has three cost layers:
- Participant fees (asset-based and fixed account fees)
- Employer administrative burden (payroll configuration and compliance)
- State-level administrative oversight
In early years, participant fees do not cover total operating costs. The proposed unclaimed-property transfer serves as a bridge subsidy during this ramp-up period.
This means that, for a number of years, public-controlled funds are helping finance the program’s fixed administrative costs while enrollment and assets grow.
It does not mean the state is depositing money into individual retirement accounts. It does mean the program infrastructure is being supported by funds that would otherwise flow elsewhere.
Does the Model Make Economic Sense?
The economic case for Vermont Saves rests on behavioral assumptions.
Research consistently shows that automatic enrollment increases participation rates compared to voluntary opt-in retirement accounts. If a significant share of current participants would not have opened or consistently funded an IRA on their own, then even a modest-fee program could increase overall retirement savings statewide.
However, for workers carrying high-interest debt, directing $50 per month into retirement instead of debt repayment can be mathematically disadvantageous in the short term. A 24% credit card interest rate far exceeds long-term expected market returns. The benefit of auto-enrollment depends heavily on household financial stability.
The long-term sustainability question also depends on participation growth. If enrollment continues expanding toward 10,000–15,000 funded accounts with rising balances, fee revenue may close the gap by the early 2030s, as projected. If growth stalls, pressure to extend bridge funding would likely follow.
What Vermonters Should Watch
Three numbers will determine whether Vermont Saves becomes self-sustaining:
- Funded account growth
- Average account balance growth
- Annual administrative expenses
If those trend lines move in the right direction, the program could stand on participant fees alone. If they do not, the temporary subsidy risks becoming structural.
At its core, Vermont Saves is not a debate about investment performance. It is a debate about whether a state-facilitated automatic savings system can scale efficiently enough to justify its administrative footprint.
The math is not ideological. It is simply a question of growth versus fixed cost.
The answer will become clearer over the next several budget cycles.
Dave Soulia | FYIVT
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