In the spirit of the trail-blazing pioneers who settled it, Oregon was one of the first states to sponsor a retirement plan. Several other states have since followed in its footsteps as they try to increase savings opportunities for employees who lack access to retirement benefits.
What is OregonSaves?
OregonSaves is a state-mandated retirement plan, meaning that certain employers must either enroll their employees in the program or sponsor a qualifying plan of their own through the private market. Eligible businesses that fail to comply may be penalized.
How does OregonSaves work?
OregonSaves functions as a Roth individual retirement plan (IRA) funded via post-tax payroll deductions. Employees of participating businesses are automatically enrolled in the plan within 60 days of their hiring date at a default contribution rate of 5%. This rate increases 1% annually up to a 10% maximum, though employees may change their contribution rates or opt out of the program at any time. The first $1,000 is invested in an OregonSaves Capital Preservation Fund, followed by an OregonSaves Target Retirement Fund, depending on the employee’s age.
Which employers need to register and when?
Private businesses with one to three employees have until July 31, 2023 to register for OregonSaves. The deadline for all other employers in the state has passed.
What if employers already offer another retirement plan?
Employers who sponsor a 401(k) or other qualified retirement plan are not required to participate in OregonSaves, but must certify their exemption online. Exemption certificates are valid for three years from the filing date.
Who is eligible to participate in the OregonSaves retirement program?
OregonSaves is open to all individuals 18 years of age or older who are employed in Oregon, have earned income and are eligible to contribute to an IRA. This includes part-time workers, seasonal employees who work at least 60 days, self-employed individuals and employees who don’t qualify for an employer-sponsored plan.
What are the benefits of OregonSaves?
OregonSaves is an affordable option for many businesses. There are no administrative fees charged to employers and plans are funded entirely by employees. The state-run option is also advantageous for individuals enrolled in the program because they are fully vested from day one and can take their retirement savings with them if they change jobs.
What are the drawbacks to the OregonSaves program?
Although OregonSaves offers retirement benefits to those who didn’t have them before, the program doesn’t maximize an individual’s savings opportunities. Employers cannot match employee contributions and the annual contribution limit is less than other types of retirement plans. Employees must also pay 1% of their account balance in yearly administrative fees.
How do businesses register for OregonSaves?
OregonSaves was designed with busy employers in mind, which is why registration can be completed quickly and easily by following these steps:
- Collect information
Employers have to provide their employer identification number (EIN) and OregonSaves access code, as well as these details for every employee: Social Security number, first and last name, birth date, address, phone and email. - Assign payroll delegates or representatives Any HR personnel or payroll service providers who help manage payroll must be identified.
- Create a payroll list
At least one payroll list is required with a payroll date set 30 days in advance. Additional payroll lists can be created as necessary. - Add employees
Eligible employees are added to the payroll list and notified that they’ve been auto-enrolled. They may then customize their plan settings or opt out. - Provide bank information
Electronic debit from a bank account is recommended to ensure the state receives retirement plan contributions in an efficient and timely manner. - Submit payroll contributions
On the designated payroll day, employers deduct contributions from each employee’s post-tax earnings and send them to OregonSaves. - Perform account maintenance
In addition to the payroll deductions, employers are responsible for keeping track of newly-eligible employees, opt out requests, terminations and changes in contribution rates,
How does OregonSaves compare to other retirement plans?
ADP designs retirement plans that work better
| Features | OregonSaves IRA | ADP 401(k) | ADP SIMPLE | ADP SEP |
|---|---|---|---|---|
| Auto Enroll | 5% | Available | Available | N/A |
| Auto Escalation | 1% annual increase on enrollment anniversary up to 10% | Available | N/A | N/A |
| Payroll Integration | Manual via website | Full integration | Full integration | N/A |
| Investment Option | Limited to 14 funds | Broad range of funds | 65+ options | 65+ options |
| Investment Advice | N/A | Available | Available | Available |
| Taxability | Roth after-tax contributions | Pretax & Roth contributions | Pretax contributions | Pretax contributions |
| Annual Contribution Limit | $6,500 employee contributions + $1K catchup (over 50) | $23,000 employee contributions + $7,500 catchup (over 50) + optional employer contributions | $16,000 employee contributions + $3,500 catchup (over 50) + employer contributions | 25% of total compensation up to $66,000 (all employer contributions) |
Can a business establish its own employee retirement plan?
Instead of a participating in OregonSaves, employers have the alternative of sponsoring another plan on their own. Qualified options include:
- 401(a)
- 401(k)
- 403(a) qualified annuity plan
- 403(b) tax-sheltered annuity plan
- 408(k) simplified employee pension
- 408(p) SIMPLE IRA
- 457(b) governmental deferred compensation plan
Payroll deduction IRAs are excluded.
Frequently asked questions about OregonSaves
Is there a penalty for employers who don't register for Oregon Saves?
Employers who don’t sponsor a retirement plan or participate in OregonSaves by the appointed deadline may be penalized $100 per affected employee. The maximum fine per year is $5,000.
Is OregonSaves an IRA?
Yes, OregonSaves is a Roth IRA. Employees contribute post-tax dollar to the plan and after retirement, may generally draw from their savings tax free.
Is OregonSaves a 401(k)?
OregonSaves is not a 401(k), but that type of plan is a qualified option for employers who prefer not to enroll in the state-run program.
Can employees opt out of OregonSaves?
Yes, employees can opt out of OregonSaves at any time by submitting a request via the plan website, phone or regular mail.
This information is intended to be used as a starting point in analyzing state-mandated retirement plans and is not a comprehensive resource of all requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
Unless otherwise agreed in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisor or firm for the provision of advice; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans. All ADP companies identified are affiliated companies.
ADP, Inc. is affiliated with ADP Broker-Dealer, Inc. (“ADP BD”), a limited purpose broker dealer registered with the Financial Industry Regulatory Authority (“FINRA”), and operating pursuant to Securities and Exchange Commission (“SEC”) Rule 15c3-3(k)(2)(i), approved by FINRA to offer 401(k) and SEP/ SIMPLE IRAs, and related retirement plans (the “Retirement Products”) on a payroll deduction basis.
