By Dean Huber
More than 1 million Oregon workers do not have access to an employer sponsored retirement savings plan at work. The Oregon Legislature considered this a retirement savings crisis and passed a bill in 2015 to remedy the situation. They created OregonSaves, a state sponsored retirement savings program for private sector employees. The Oregon Retirement Savings Board (“the Board”), the entity with oversight responsibility, has recently issued final rules implementing the plan. These rules will have some level of impact on every Oregon private sector employer.
The plan is designed to work similar to the typical 401(k) plan in that employers will withhold contributions from an employee’s wages and remit them to a Roth Individual Retirement Account (“IRA”), run by the state. Unlike most other types of employer sponsored retirement plans, only employee contributions are allowed under the OregonSaves plan. Employees who do not opt out of participation or make an affirmative contribution election will be automatically enrolled at a contribution level of 5% of compensation. If an employee has not opted out of auto-escalation, the contribution level will increase by 1% each year on January 1 for employees who are contributing less than 10% of compensation and have been enrolled in the plan for greater than 180 days. Contributions are subject to the annual limits on IRA contributions.
All Oregon employers will be required to register with the board. If an employer already sponsors a qualified retirement plan, they will be able to complete a certificate of exemption at this time. For these purposes, a qualified retirement plan is any plan qualified under Internal Revenue Code section 401(a) (including a 401(k) plan), qualified annuity plans under section 403(a), tax-sheltered annuity plans under section 403(b), Simplified Employee Pension plans (SEPs) under section 408(k), a SIMPLE IRA plan under section 408(p) or governmental deferred compensation plans under section 457(b). A qualified plan does not include a payroll deduction IRA. If an employer qualifies to file a certificate of exemption, they will not be required to facilitate the OregonSaves plan for its employees.
Employers not already sponsoring a qualified retirement savings plan will be required to facilitate the OregonSaves plan. This includes making information available to employees and remitting contributions withheld from employees’ wages. The registration process for these employers will include an enrollment process where they will verify or provide a limited amount of additional information and complete the enrollment process for participating employees.
At this time, all employers should determine the date by which they will be required to register and comply with these rules. The date on which an employer must comply is determined based on the number of Oregon employees, as follows:
|Number of Oregon Employees||Latest Date Registration Required|
|100 or more||November 15, 2017|
|50 – 99||May 15, 2018|
|20 – 49||December 15, 2018|
|10 – 19||May 15, 2019|
|5 – 9||November 15, 2019|
|4 or fewer||May 15, 2020|
Initial automatic enrollment of eligible employees (all Oregon employees age 18 and older, including part-time employees) must begin within 60 days of an employer’s registration date, and new employees must be auto-enrolled within 60 days of their hire date.
Employers that will be participating in the OregonSaves plan should make sure their payroll systems will correctly handle the payroll deductions and they should have procedures in place to ensure employee contributions are remitted to an employee’s IRA in a timely manner.
The employee benefit professionals at Kernutt Stokes are up to speed with the requirements of the OregonSaves plan and are available to answer questions and provide assistance as necessary. Please contact Dean Huber or Andrea Smith in our Employee Benefit Plans practice group if you have any questions or need any assistance with respect to implementing the OregonSaves plan or interpreting any of the plan’s requirements.