By Randy Cook & Christine Moehl
Employee Benefits & Executive Compensation
On April 18, 2017, the Oregon Retirement Savings Board issued final regulations that will launch the “OregonSaves” Retirement Program (the “Program”) enacted by the Oregon Legislature in 2015. Under the Program, all Oregon employers must register with the Oregon Retirement Savings Board (the “Board”) and either: (1) begin automatically enrolling eligible employees in the new Oregon Retirement Savings Plan; or (2) claim an exemption from the Program by registering their qualified retirement plan with the Board.
Which Employers are Subject to the Program?
All Oregon employers with at least one employee are subject to the Program. An employer is considered to have at least one employee if the employee is reported by the employer for Oregon unemployment insurance purposes.
Which Employers Can Claim an Exemption?
Any Oregon employer that sponsors a qualified retirement plan can claim an exemption from the Program. A “qualified retirement plan” means any defined contribution, defined benefit, or IRA-based plan. This includes 401(k) plans, 403(b) plans, profit sharing plans, money purchase pension plans, traditional defined benefit plans, cash balance plans, employee stock ownership plans, SIMPLE IRA plans, SEP IRA plans, and governmental 457(b) plans.
When Do Employers Need to Register?
The Program will initially launch on July 1, 2017 for a small pilot group of Oregon businesses that have volunteered to take part in the Program. Eventually, all Oregon employers, whether claiming a qualified plan exemption or not, must register with the Board. The deadline for registering is determined by the size of the employer, as follows:
# of Employees Registration Deadline
100 or more November 15, 2017
50 to 99 May 15, 2018
20 to 49 December 15, 2018
10 to 19 May 15, 2019
5 to 9 November 15, 2019
0 to 4 May 15, 2020
Registration is done through an internet portal that has yet to be developed by the Board, but presumably will be available before the first registration deadline. The Board will also be issuing procedures that employers with qualified plans can follow for obtaining a Certificate of Exemption. Exemptions must be renewed once every three years. If your qualified plan is maintained by Saalfeld Griggs, we will be sending you more information as it becomes available and will assist you in obtaining your Certificate of Exemption.
What Do Non-Exempt Employers Need to Do?
Oregon employers that are not exempt (i.e., employers that do not sponsor a qualified plan) must enroll all of their eligible employees in the Program. An “eligible employee” is any employee who is at least age 18 and who has been employed by the employer for at least 60 days. The employer must automatically withhold 5% of each eligible employee’s wages, unless the employee elects to withhold a different amount (including zero). Withholdings are done on an after-tax (“Roth”) basis, and must be deposited into investment funds managed by the Board. The maximum annual withholding is limited to the amount that an individual could contribute to an IRA each year, which is currently $5,500 for individuals under age 50 and $6,500 for individuals age 50 and older. The first enrollments must occur within 60 days of the registration deadline indicated above. Future enrollments must occur within 60 days of each eligible employee’s date of hire. In addition, beginning January 1, 2019, employers must increase the withholding rate for each employee by 1% per year until the withholding rate reaches 10% (or the annual IRA limits indicated above). Employees who are subject to withholding and escalation can opt out at any time and can also withdraw funds from their Program account at any time.
Didn’t Congress Recently Derail State-Run Retirement Programs?
Yes and no. Last year President Obama signed into law a “safe harbor exemption” that facilitated – and in fact encouraged – the creation of state-run retirement programs. The Obama law made clear that state-run programs like OregonSaves would be exempt from preemption under the Employee Retirement Income Security Act of 1974 (“ERISA”). Without the exemption, the legality of state-run retirement programs was unclear. On May 3, 2017, the US Senate passed a bill that eliminates Obama’s safe harbor exemption, and President Trump has indicated that he will sign that bill into law. As a result, the question of whether state-run retirement programs are preempted by ERISA is again up in the air. However, following the Senate’s action on May 3, Oregon Treasurer Tobias Read said, “[w]hile I have the deepest disappointment at the latest attack on working families from President Trump and Congressional Republicans, Oregon and states like us cannot afford to sit back and do nothing. . . . In Oregon, OregonSaves will continue to move forward with our pilot program that is launching on July 1 this year.”
Need More Information?
For more information about the OregonSaves Retirement Program or for assistance in obtaining a Certificate of Exemption, please contact Randy Cook or Christine Moehl.
