How does the OregonSaves retirement plan work?
The OregonSaves plan, managed by the state of Oregon, is a Roth IRA funded through payroll deductions. Once an employer signs up for the plan, all W-2 employees, including part-time workers, are eligible to participate.
Employees are automatically enrolled at a default of 5%, meaning that unless employees choose to opt out, they will automatically contribute 5% of their after-tax income to the plan.
Is OregonSaves legally mandatory?
Yes, all employers, no matter how many employees they have (even 1) must facilitate OregonSaves, if they don't already offer a qualified, employer-sponsored retirement plan. Read more about other state-mandated retirement plans.
What are the OregonSaves registration deadlines?
- Employers with 20 or more employees: December 15, 2018
- Employers with 10-19 employees: May 15, 2019
- Employers with 5-9 employees: November 15, 2019
- Employers with 3-4 employees: March 1, 2023
- Employers with 1-2 employees: July 31, 2023
What are the downsides of Oregon Saves?
- OregonSaves is a great retirement plan for many Oregon-based employers, but there are some downsides to consider:
- OregonSaves is a Roth IRA retirement plan, which has income limits. If you make over a certain amount each year, you will not qualify for the plan. You can visit the IRS website to determine if you qualify. While OregonSaves does offer a Traditional IRA, another option is an employer-sponsored 401(k) plan, which has no income limits.
- OregonSaves is not subject to the same worker protections that other tax-qualified retirement savings plans are under ERISA, a federal law that requires fiduciary oversight of retirement plans.
- Employees don’t receive a tax benefit for their savings in the year they make contributions. OregonSaves only allows after-tax (Roth) contributions. Investment earnings within a Roth IRA are tax-deferred until withdrawn and may eventually be tax-free.
- Since OregonSaves is an IRA plan, contribution limits are much lower than you get with a 401(k). Even if employees max out their contribution to OregonSaves, they could do better with another retirement plan.
- OregonSaves doesn’t offer employer matching and/or profit sharing contributions.
- There are a relatively limited selection of investments, which may not be appropriate for all investors. Typical 401(k) plans offer a much broader range of investment options and often additional resources such as managed accounts and personalized advice.
- There is no cost to employers to offer OregonSaves; however, employees do pay approximately $1 per year in fees for every $100 in their account, depending on their investments.
What are the benefits of OregonSaves?
- OregonSaves makes it easy to save, with automatic payroll contributions to a Roth IRA.
- The default savings rate is 5% of gross pay and employees are automatically enrolled, so they don’t need to worry about the hassle of signing up.
- Employees can change the rate they invest at any time.
- Participation is voluntary. If no action is taken, employees will be auto-enrolled.
- Employees can opt-out or back into the program at any time.
- Employee accounts are portable and remain with the worker, even if they change jobs.
Do you still need to offer OregonSaves if your company already offers a 401(k) plan?
No, you do not need to offer OregonSaves if your company already offers a 401(k) plan. OregonSaves is a state-sponsored retirement savings program that is designed to help workers who are not offered a retirement plan by their employer. If your company already offers a 401(k) plan, your employees are already eligible to save for retirement.
You will need to file a Certificate of Exemption. This shows that you offer a qualified retirement plan — 401(k) or 403(k) — to all your employees within 90 days of hiring. As soon as it’s approved your Certificate of Exemption will be valid for three years.
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