A new era in retirement saving is dawning on Oregon employees, and if your business employs 100 or more employees in Oregon, you must take action by November 15.
If your company employs workers in Oregon and does not sponsor a retirement plan, you will soon be required to enroll employees in the new OregonSaves state-run retirement program. If your company already sponsors a retirement plan for its employees, you are exempt from participation in the OregonSaves program, but you will be required to claim exemption online and renew that exemption every three years.
The OregonSaves program requires employers that do not offer their employees a retirement plan to enroll their Oregon employees in the OregonSaves retirement program. Under the program, employees will automatically contribute 5 percent of their compensation (on an after-tax basis) via payroll deduction to a Roth IRA established for them. Employees’ contributions will be increased by 1 percent of compensation each year until 10 percent of compensation is being contributed. Employees may, however, opt out of the program or change their contribution percentage. No employer contribution is required or permitted. The employer’s involvement is limited and includes enrolling employees, collecting employee contributions and remitting them to the OregonSaves program, and maintaining records of employee elections. Once withheld from employees’ wages, all contributions must be remitted to OregonSaves within seven business days. The program is overseen by the Oregon Retirement Savings Board, which has selected Ascensus as the program administrator and State Street Global Advisors as the program’s investment manager.
If an employer already offers its employees a retirement plan, the employer need not (and cannot) enroll its employees in the OregonSaves program, but must file a certificate of exemption online by the dates listed below, and every three years thereafter as long as it qualifies for an exemption. An employer is exempt from participation in OregonSaves even if its retirement plan does not cover all its employees or if it imposes a waiting period before employees’ participation in the plan. Retirement plans that exempt an employer from participation in the OregonSaves program include a qualified plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (“Code”) (including a 401(k) plan, profit-sharing plan, money purchase pension plan, or defined benefit pension plan), a Code Section 403(a) plan, a tax-sheltered annuity plan under Code Section 403(b), a Simplified Employee Pension (SEP) plan, a SIMPLE IRA, and a governmental 457(b) plan. It does not include payroll deduction IRAs.
Employers with 100 or more Oregon employees must register with the program or file a certificate of exemption by November 15, 2017. The deadlines for employers with fewer Oregon employees are as follows:
- 50-99 employees: May 15, 2018
- 20-49 employees: December 15, 2018
- 10-19 employees: May 15, 2019
- 5-9 employees: November 15, 2019
- 4 or fewer employees: May 15, 2020
An employer’s employee count is the number of covered workers for unemployment insurance on the employer’s most recently filed Oregon Quarterly Tax Report (Form OQ).
OregonSaves will be mailing information to businesses with Oregon employees regarding how to register or file an exemption. This process is completed online.
As you might imagine, there is controversy surrounding the OregonSaves program, with some employers and industry stakeholders disputing whether it is enforceable. The Employee Retirement Income Security Act of 1974, as amended (“ERISA”), is a federal law that governs retirement plans established or maintained by private employers. ERISA “preempts” state laws that relate to ERISA plans, which means that state laws cannot regulate ERISA plans. In 2016, in order to encourage the establishment of state payroll deduction retirement programs like OregonSaves, and to allay concerns that such plans might be subject to ERISA, the U.S. Department of Labor under the Obama Administration published a final rule exempting such plans from ERISA if certain criteria were met. In May 2017, under the new administration, Congress passed a joint resolution nullifying the DOL’s ERISA exemption for state payroll deduction retirement plans. Thus, it is not clear whether ERISA applies to the program. Despite Congress’s action, Oregon has continued its implementation of the OregonSaves program.
On October 12, 2017, the ERISA Industry Committee (“ERIC”), on behalf of its members, filed a lawsuit in the District Court of Oregon against the chair of the Oregon Retirement Savings Board. (ERIC is a nonprofit trade association that represents the interests of large employers that sponsor ERISA plans.) The lawsuit asserts that ERISA preempts the requirement that an employer that offers its employees a retirement plan must file an exemption from OregonSaves. In its filing, ERIC requests that the court prohibit the state from enforcing that provision. Note that the case does not challenge the entire OregonSaves program—only the requirement that employers that sponsor a retirement plan must file a certificate of exemption. (It is possible that other lawsuits will be filed challenging the requirement that employers that do not sponsor a retirement plan register their Oregon employees in the program.) If your company would like to discuss intervening in the lawsuit, or filing an amicus brief to advise the court of additional information or arguments, Miller Nash’s litigation group would be happy to assist.
If you have questions about the OregonSaves program or how it applies to your business, contact a member of the Employee Benefits Team at Miller Nash Graham & Dunn LLP.