The state of Oregon has officially launched its pilot program for OregonSaves, the first-of-its-kind state sponsored retirement savings plan. A small group of employers across the state, together representing 151 employees, officially kicked off the pilot program on July 1, 2017.
Background
According to Oregon State Treasury, as many as 1,000,000 people -- or 1 out of every 4 people in the state -- could eventually benefit from this retirement savings plan. State officials have estimated that 64,000 (mostly small) businesses will have employees eligible to participate in the plan.
“We are committed to making sure the plan works well for workers and employers, and will make a dent in the massive retirement savings gap that threatens to overwhelm public services.”
While sponsored by the state, OregonSaves is not a pension plan and is not connected to the Oregon Public Employee Retirement System (PERS).
How It Works
Employers in Oregon will be responsible for automatically enrolling their eligible employees into the OregonSaves retirement savings plan. Each employee will have 30 days to opt-out of the program after they've received their enrollment material. Self-employed workers will need to enroll in the program themselves.
By default, employers must deduct 5% of an eligible employee's after-tax wage, and contribute that amount into a Roth IRA in their name. Employees can change their contribution amounts in 1% increments, with a minimum of 1% and a maximum of 10%. Each employee is limited to one contribution change per month.
Employees are also subject to existing Roth IRA contribution limits. For 2017, those limits are:
| Tax Filing Status | Modified Adjusted Gross Income | Contribution Limit |
|---|---|---|
| Single, head of household, or married filing separately | Uner $118,000 | Up to $5,500 |
| $118,000 - $132,999 | A reduced amount* | |
| $133,000 and over | Zero | |
| Married but filing separately, and you live with your spouse at any time in 2017 | Up to $10,000 | A reduced amount* |
| $10,000 and over | Zero | |
| Married filing jointly | Under $186,000 | Up to $5,500 |
| $186,000 - $195,999 | A reduced amount* | |
| Up to $196,000 | Zero |
*To calculate your reduced contribution limit, refer to IRS Publication 590-A, Contribution to IRAs.
In 2017, eligible employees age 50 or older are allowed to make an additional $1,000 in "catch-up" contributions to a Roth IRA.
By policy, the first $1,000 contributed by an employee is invested in a capital preservation investment selected by the Oregon Retirement Savings Board. After the first $1,000, employees can choose how to invest their contributions from a menu of low-cost index funds managed by State Street Global Advisors (SSGA), which includes a broad range of target date funds.
Regardless of investment choice, each participant in the OregonSaves Retirement Savings Plan will pay an annual expense ratio of 1.05%, or $10.05 per $1,000 invested, annually.
There are no charges to an employee for withdrawals, changing contribution amounts, or moving money between investment funds.
It's Mandatory
Any business with employees in Oregon that don't already offer a qualified retirement plan (i.e., a 401(k) plan) will be required to facilitate the State's program for its employees.
Assuming all goes well with OregonSaves' pilot program, the first registration, or "comply-by" date, will be November 15, 2017. By this date, businesses with 100 employees or more will have to register with OregonSaves or file their Certificate of Exemption. The program will roll out in phases with the last phase ending May 15, 2020.
| Number of Employees | Registration Deadline |
|---|---|
| 100 & over | November 15, 2017 |
| 50 - 99 | May 15, 2018 |
| 20 - 49 | December 15, 2018 |
| 10 - 19 | May 15, 2019 |
| 5 - 9 | November 15, 2019 |
| Under 5 | May 15, 2020 |
Regardless of the number of employees, a business will be exempt from the OregonSaves Retirement Savings Plan if they are able to certify that the business offers a qualified plan, such as a 401(k) or 403(b), to all its employees within 90 days of hire. Once a Certificate of Exemption is approved, it is valid for 3 years, as long as the business continues to offer its qualified plan.
Employee Eligibility
For those businesses that don't qualify for exemption, they must facilitate OregonSaves for all their employees in Oregon that are age 18 or older. Self-employed workers and part-time workers will also be eligible to participate in the plan.
Additional Resources
To learn about the latest developments of OregonSaves, you can sign up to receive email updates, meeting agendas, and notices here. The Oregon Retirement Savings Board has also posted all the material from previous board meetings online. If you'd like to do a deeper dive, take a look at some of the following resources.
- Barran Liebman Breakfast Seminar on July 11th (link)
- OregonSaves FAQ (link)
- OregonSaves Facebook (link) and Twitter (link)
If you're looking for advice on how to navigate the topic of retirement savings for your employees, we'd love to have that conversation with you. Give Eric a call at 971-930-4447, or reach out to our sales team at sales@independentretirement.com.