Oregon Launches Retirement Savings Program: Employer Registration Will Be Required
In 2015, Oregon passed legislation creating a state-based retirement savings program that has since been named “OregonSaves.” Implementation of the OregonSaves program was delayed pending the issuance of final rules by the governing Oregon Retirement Savings Board (the “Savings Board”). These final rules were issued on April 18, 2017, paving the way for the launching of the new program.
In brief, OregonSaves requires an employer that does not already sponsor a qualified retirement plan to automatically enroll its workers age 18 or older in a state-managed Roth Individual Retirement Account (“IRA”) program. Contributions will be made by employees on a payroll-deduction basis. Employees can choose to opt out of the program.
Employers with Oregon employees, including employers that sponsor a qualified retirement plan, will need to register with the Savings Board.
An outline of the significant features of the new OregonSaves program is below.
All employers having Oregon employees are presumptively subject to the new law. For this purpose, an Oregon employee is one who is taken into account and reported by the employer for Oregon unemployment insurance purposes.
However, an employer is exempt from the obligation to automatically enroll its employees in the OregonSaves program if the employer sponsors a qualified retirement plan. The qualified retirement plan could include a Section 401(a), 401(k), 403(b) or 457(b) plan. In other words, generally any type of qualified retirement plan will suffice.
After the legislation was enacted, there was a question as to whether an employer that maintained a qualified retirement plan that did not cover all employees (for example, a plan that excluded part-time employees) would be exempt from the automatic obligation in regard to non-covered employees. The final rules make it clear that the exemption is available if the employer offers a qualified retirement plan “to some or all” of its employees. Therefore, so long as an employer offers qualified retirement coverage to any employees, it will be eligible for exemption.
The exemption from the automatic enrollment obligation is conditioned upon the employer filing a Certificate of Exemption with the Savings Board under procedures to be established.
Required Employer Registration
The final rules require that all employers with Oregon employees register with the Savings Board. The registration is made through the use of an Internet portal that is to be established by the Savings Board. The information to be submitted with the registration includes the following:
- The employer’s name (and assumed business name, if any);
- The employer’s federal Employer Identification Number;
- The employer’s mailing address;
- The name, title, telephone number and email address of an individual designated by the employer as the point of contact; and
- The number of Oregon employees.
The timing of the initial registration will depend on the number of Oregon employees, as set forth in the table below.
Number of Oregon Employees
100 or more
November 15, 2017
May 15, 2018
December 15, 2018
May 15, 2019
November 15, 2019
4 or fewer
May 15, 2020
The key plan design features of the Oregon Retirement Savings Plan are outlined below.
- All Oregon employees 18 and older, including part-time employees, will be eligible for automatic enrollment.
- Initial automatic enrollment of eligible employees must begin no more than 60 days after the non-exempt employer’s Registration Date (i.e., by January 14, 2018 in the case of an employer with 100 or more Oregon employees). Thereafter, automatic enrollment must occur within 60 days of an employee’s commencement of employment.
- Contributions will be made to a Roth IRA by payroll deduction on an after-tax basis.
- The initial automatic contribution rate for new employees will be 5% of wages.
- Beginning on January 1, 2019, an employer must increase the contribution rate by 1% per year, up to 10% of compensation. The auto-escalation will occur on January 1 of each year for each employee who has been enrolled in the program for at least 180 days.
- Employees subject to the automatic enrollment can opt out of the program. They can also elect a different contribution rate, or waive the auto-escalation.
- Am employer may not make its own non-elective or matching contributions. Only employee contributions are permitted.
- The first $1,000 of an employee’s contribution will be invested in a capital preservation investment fund. All subsequent contributions will be invested in a target date fund.
- The maximum amount an employee can contribute in a year is equal to the IRA limits (currently $5,500 for adults under age 50, and $6,500 for those older than 50).
- An employee can elect a withdrawal from the IRA account at any time.
- The Savings Board will charge accounts with a program administrative fee not to exceed 1.05% per annum, to defray the costs of operating the program, including for professional investment management services.
For employers that sponsor a qualified retirement plan, the only action that will be required is to register with the Savings Board by the applicable Registration Date. The registration deadline (for large employers) is close to seven months away, so there is no urgency. However, employers will wish to digest the above information at this stage just in case there are any preliminary questions, and to place the Registration Date on their calendars.
In addition, three other states (California, Connecticut, and Maryland) have also recently enacted laws establishing state-run retirement savings programs for private-sector workers. These other state programs are not currently up and running, but instead are awaiting the issuance of implementing rules, regulations and the like. Employers with employees in these states will need to monitor the developments.