The Oregon Department of Revenue issued information regarding the new Oregon Saves retirement savings program, which is set to take effect on July 1, 2017. First, the state will open the program to a small pilot group of employers, then to employers of 100 or more employees in 2018.

As we previously reported, under legislation enacted in mid-2015 (HB 2960; Chapter 557, 2015 laws) Oregon employers will be required to automatically enroll their employees in a state-established qualified retirement savings plan if there is no other qualified employer retirement savings plan available to them.

Absent any other employee retirement savings plan, employers will be required to establish a payroll deduction option for employee contributions to the state plan, but they will not be required to match any portion of these contributions, nor will they have any financial obligations.

Congress could upend state mandatory retirement savings accounts

The House and Senate have introduced resolutions to repeal the US Department of Labor regulations (29 C.F.R. Section 2510.3-2(a)) that permit states and localities to establish mandatory payroll deductions for individual retirement accounts. Final passage of these resolutions could derail programs such as this one established by Oregon.

Oregon Saves program details

Oregon employers that do not offer a retirement plan to their employees will be required to register with Oregon Saves and offer this retirement savings program to their employees. Employers that offer a retirement plan to some or all employees will need to certify to the program that they offer a qualified plan. Employers that offer a retirement plan to some, but not all, of their employees may, in the future, be required to offer the program to employees that do not qualify for the employer sponsored plan (i.e., part-time employees).

What employers need to do

Starting July 1, 2017, the State of Oregon will notify businesses how and when they need to inform the state whether or not they offer a retirement savings plan. Those that offer a retirement savings plan will complete a simple certification process. Those that don't offer a retirement savings plan will need to offer Oregon Saves to their employees. When they must do so depends on the size of the employer.

Oregon Saves will first launch in July 2017 to a small pilot group of businesses to make sure it works well for everyone. It will then roll out in phases based on the number of employees a business has, starting with businesses with 100 or more employees in 2018. The plan will be phased in over several years, and workers at smaller employers will be added at later dates.

Once notified of the requirement, employers will:

— Provide employee data to the state, to allow the state to set up employee accounts

— Provide information about Oregon Saves to employees

— Automatically enroll and begin payroll deductions for employees that do not opt-out of the program

— Keep track of employee opt-out and contribution decisions

What employees are eligible?

Oregon Saves is for any worker 18 and older employed in Oregon who doesn't have a retirement savings option at their job. To be eligible, employees must also make less than the income limits? set by the federal government for Roth Individual Retirement Accounts (IRA), which are $133,000 for a single tax filer and $196,000 for married tax filers in 2017.

How employees get enrolled in Oregon Saves

Employers will provide program materials to employees, as provided by the state. Employers will enroll employees through the Oregon Saves website unless an employee opts out of the program or the employee ceases working for the employer before the date the employer is required to enroll the employee in the program.

Every pay period, employers will deduct a percentage of a participating employee's after-tax wages (standard contribution rate is 5%, but the employee may choose another rate at 1% increments). Starting in the future, contributions will automatically increase by 1% per year until the contribution percentage is 10% (employees will be allowed to opt out of the increase).

Savings will be made into a Roth IRA in the employee's name on an after-tax basis. In the future, employees will have the option to save through a traditional IRA on a before-tax basis. Employees can save up to $5,500 per year ($6.500 if age 50 or older). Employers will not be responsible for monitoring whether employees are close to the contribution limit.

Details to share with employees

Employees' money will be managed by professionals, with the goal of gaining value over time. Employee contributions will be investment in an age-based fund based on when they plan to retire. Age-based funds shift the amount of stocks, bonds, and other investments to help increase earnings early on and then reduce risk as participants approach retirement age. All investments carry risk, and Oregon Saves will not offer any guarantee of returns. If employees want to limit their risk, they can choose a capital preservation fund instead of an age-based fund. There will also be an investment growth option for those who have a higher risk tolerance.?

Employees will be able to access their state savings account at any time online or by phone. The account is portable and stays with the employee. If the employee moves to another job (or simultaneously works for another employer) that doesn't offer a retirement savings option, the new employer will make deductions into the same account. If the employee moves to a job in another state or starts working for an employer that offers its own plan, the employee can keep their money in their Oregon Saves account, roll it over into something else, or take out their money. Employees can take out their money at any time if they need to. There is no penalty for taking out money early, but doing so will have an impact on their retirement.?

Oregon Saves will charge a fee of 1% to help pay for management of accounts and investments. There will be no fees for taking out employee contributions or making changes to types of investment or contribution amount.?

The state is soliciting employer opinions

The Oregon Treasury Department hosted a meeting with payroll providers on February 21, 2017 to discuss how to make sure that the process for facilitating Oregon Saves and making deductions is clear and aligned with the way employers and payroll providers already do business. Employers interested in the meeting or providing feedback, should contact the Treasury Department for more information at RetirementSavings@ost.state.or.us.

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