What is OregonSaves?
This article was updated on November 21, 2019 with the latest information.
OregonSaves is a state-run retirement plan for employers who do not offer an employer-sponsored retirement plan to their employees. With OregonSaves, employers facilitate payroll deductions from their employees’ paychecks to send to the state-sponsored plan.
The payroll deductions for employees begin at five percent of their gross pay. These amounts are subject to automatic increases of one percent per year until the savings rate reaches a maximum of 10 percent. The deductions occur after tax, and the contributions are sent to a Roth IRA administered by OregonSaves. Employees may also change their contribution percentage or opt out of the program entirely.
OregonSaves maintains and manages the Roth IRA accounts and investments. The employer has no responsibility for the accounts. Their responsibility is to:
- Register and provide employee data to OregonSaves
- Provide OregonSaves information to their employees
- Make automatic payroll deductions and send them to OregonSaves
- Keep track of the employee contributions.
What are the investment options?
The first $1,000 for each employee is automatically invested in the OregonSaves Capital Preservation Fund, which invests in money market securities. Savings over $1,000 are automatically invested in the OregonSaves Target Retirement Funds based on when the employee will meet the retirement age of 65. These funds are invested in a mix of stock and bond funds, with a greater allocation to stocks for younger employees. The investment mix of the funds gradually shifts from stock to bonds as employees approach age 65.
OregonSaves also offers a growth fund, which is an S&P Index Fund. This fund is not meant for automatic investing but is available to employees who want a more aggressive investment option under the plan.
State Street provides the OregonSaves investment funds. Ascensus College Savings Recordkeeping Services, LLC is the program administrator. OregonSaves states that the expense passed to employee participants is approximately $1 for every $100 saved. This includes the program’s administration, Roth IRA/Custodian fees and the investment fund operating expenses.
What do Oregon employers need to do now?
Deadlines for businesses with more than nine employees have passed. If your business has from five to nine employees, you are required to register with OregonSaves by November 15, 2019. If you currently sponsor a retirement plan, your registration may indicate that you are exempt from the program.
To be exempt from the state-run plan, an employer must sponsor one of the following types of retirement plans:
- 401(k), Profit Sharing or Pension Plan qualified under section 401(a) of the Internal Revenue Code
- Qualified Annuity Plan under section 403(a)
- Tax Sheltered 403(b) plan under section 403(b)
- Simplified Employee Pension (SEP) Plan under section 408(k)
- Simple IRA plan under section 408(p)
- Governmental deferred compensation plan under section 457(b)
Payroll deduction IRAs do not count for exemption from the OregonSaves program. Oregon employers can go to the OregonSaves website to certify that they are exempt.
Employers are responsible for acting within the corresponding program deadlines depending on the size of their business:
- Employers with 5-9 employees: November 15, 2019
- Employers with 4 employees or fewer: May 15, 2020
Companies that are currently required to enroll in Oregon Saves because they do not sponsor a retirement plan should consider their options to see if they should adopt their own plan instead of participating in the state-run program.
How can retirement plans benefit owners and employees?
The OregonSaves program will provide employees the opportunity to accumulate retirement savings. Business owners who don’t already have a retirement plan should consider adopting a plan for their business.
A company-sponsored plan provides distinct advantages for a business owner or executive’s own retirement savings. They allow for special testing to provide greater contributions to owners and executives as long as a minimum employer contribution is made for eligible employees. In addition, all employer contributions made to a company-sponsored retirement plan are tax deductible. Employer contributions help employees accumulate enough to retire and, at the same time, pay for themselves in tax savings for the company.
Below are sample maximum tax-deductible contributions allowed for an owner or executive with a combined 401(k) profit sharing and cash balance pension plan arrangement:
|Age||401(k) Profit Sharing||Cash Balance||Total|
To learn more about how qualified retirement plans can help you and your employees reduce their tax bills while becoming retirement-ready, please contact David Strom.