By Curtis Farmer, Director, Group Benefit Program
Cascade Employers Association
Beginning in July, employers in Oregon will have a new option for providing a retirement solution to their employees, but it brings with it a mandate for all employers to provide a qualified savings option for their employees that will be enforced in phases over the next several years. OregonSaves, a new state-sponsored retirement plan, launches on July 1st and, according to the State Treasurer’s office, it could assist up to 1 million Oregon employees in their efforts to save for their future.
At the time of its launch, 40 Oregon employers will be participating in the pilot program with others to join in the fall.
How it Works
When an employer enrolls in OregonSaves, all of its employees are automatically enrolled in the plan and they start automatic contributions of 5% of their paycheck into a Roth IRA, with an automatic increase enforced annually until the employee is contributing 10% of eligible pay. The employee does, however, have the right to opt out of the program at any time or change the contribution amount to a percentage of their choosing.
The first $1,000 that the employee saves is invested in a low-risk “Capital Preservation Fund,” while the remainder of funds beyond the first $1,000 of savings is invested in a target date fund that is based on the employee’s age.
Employer contributions are not required, however the employer is required to remit the employee’s contributions through payroll deduction and keep contribution records for 3 years. Contributions are submitted through an online employer portal on the OregonSaves website. New employees will need to be enrolled within 60 days of their date of hire.
As indicated earlier, this new program also brings with it a mandate. All employers will eventually have to participate in the program or file a Certificate of Exemption. This certificate is for employers that are already providing a qualified retirement plan for their employees and are therefore exempt from participating in the OregonSaves program. The certificate will need to be revalidated every 3 years and the deadline for Oregon employers to comply is based on each organization’s number of employees.
If an employer has more than 100 employees, they must comply with the mandate this year, starting November 15, 2017. Employers with 50 to 99 employees have until May 15, 2018, while those with 20 to 49 employees have until December 15, 2018. Smaller organizations have even longer to comply, as those with 10 to 19 employees have until May 15, 2019, those with 5 to 9 employees have until November 15, 2019, and those with 4 or fewer employees have until May 15, 2020 to comply.
It’s also important to note that President Trump signed House Joint Resolution 66 in May that blocked the Department of Labor’s ruling that states could sponsor savings programs that were exempt from federal ERISA requirements. As this does not prevent automatic savings programs, the Treasurer announced last month that the launch of OregonSaves would move forward as planned. More information on the program can be found at www.oregonsaves.com.