Are you an employer with employees in Oregon? If you do not offer a retirement plan to any of your employees, read on for your obligations under a new state-run retirement savings program called OregonSaves. If you do currently offer a retirement plan, find out below how to exempt your business from participation. In either case, you should be aware of the first compliance deadline on November 15, 2017.
On July 1, 2017, Oregon launched a pilot of OregonSaves. The state-run program enables private sector employees in Oregon without access to a retirement plan at work to fund a personal Roth IRA through payroll deductions. The program is mandatory for employers that do not have a retirement plan in place, regardless of the number of employees.
Oregon is one of several states, including California, Illinois, and Connecticut, to enact legislation creating a state-run retirement plan for private sector workers. However, the future of such plans has been thrown into doubt with the recent repeal of the Obama Administration’s ERISA safe harbor for states to establish private sector plans. The Oregon State Retirement Board is moving forward with its implementation of OregonSaves in spite of questions surrounding the program’s future.
November 15, 2017 Deadline for Employers of 100 or More Oregon Employees
Following completion of the initial pilot program, OregonSaves is scheduled to roll out in phases, starting with the largest employers. The first mandatory registration deadline is November 15, 2017 and applies to organizations with 100 or more employees in Oregon, as indicated on the most recently filed Oregon Quarterly Tax Report. The state will notify you if this deadline applies to you. In July, these employers should expect to receive general information about the program from the state. In October, the state plans to send instructions on how to either register with the program or certify exemption. Payroll deductions for these employers will begin in January 2018.
Smaller Oregon Employers Will Be Gradually Covered On or Before Mid-2020
Going forward, there will be two registration periods per year for mandatory registration of smaller employers. The state’s goal is for all employers not sponsoring a qualified retirement plan to be registered with OregonSaves by mid-2020. Eligible employers have the option to participate in the program before the applicable deadline.
How OregonSaves Works
Once an employer has registered with OregonSaves, all full-time and part-time employees are automatically enrolled in the program unless they elect to opt out. Employers are not required to enroll employees who stop working before the end of the program’s 60-day enrollment period. The contributions are deducted from an employee’s paycheck and deposited into a Roth IRA that is administered by a state contractor, supervised by the Oregon State Retirement Board. Employer contributions are not permitted. The accounts are subject to the same tax rules on contributions and distributions that apply to ordinary Roth IRAs. The accounts are portable and personal to employees; if an employee changes employers, he or she can continue to make contributions through payroll deductions with the new employer or independently, if the new employer is not registered with OregonSaves.
Implications for Oregon Employers
Oregon employers must either register with OregonSaves or certify their exemption from it by the applicable deadline (depending on the number of employees in Oregon). Employers are exempt if they sponsor a qualified retirement plan for the benefit of some or all of their employees. Certificates of exemption are valid for three years. For the moment, employers sponsoring a qualified retirement plan may not waive the exemption in order to participate in OregonSaves.
Employers that are not exempt from the program have the following obligations:
- Enroll participating employees
- Accurately record contribution elections in the payroll system
- Timely remit contributions to the plan administrator
- Retain employee election notices for at least three years (or have the program administrator do so)
- Provide the program administrator with basic employer and employee information relevant to program participation
- Clearly communicate to employees in an oral or written announcement that their involvement is limited to facilitating the state-run program
Where possible, the state has attempted to minimize the burden on employers. The state is responsible for drafting the relevant informational materials for employees. Employers can either distribute the materials themselves or delegate the task to the program administrator. Employers do not pay a fee for participating.
The U.S. Department of Labor has not indicated what the repeal of the ERISA safe harbor means for OregonSaves and other state initiatives. The program has also been strongly criticized by industry groups and may even face legal challenges in the coming months. Although the enforceability of the state-run plan remains uncertain, Oregon Treasurer Tobias Read released a statement reaffirming the state’s commitment to implementing OregonSaves as planned.