The deadline to register with OregonSaves for employers using professional employment organizations (PEOs) is upcoming in spring 2020. The Oregon State Treasury has informally indicated that this deadline is likely to be May 15, 2020.
In addition, the final registration date for employers with four or fewer employees was extended to January 15, 2021 (until recently, the registration deadline for these small employers was May 15, 2020).
As explained in our previous post, OregonSaves is a state-run program designed to assist the retirement saving efforts of Oregon employees. Specifically, OregonSaves covers employees whose employers do not provide a qualified retirement plan (as described in detail below), and offers those employees an opportunity to fund a personal Roth individual retirement account (IRA) through payroll deductions that are collected and submitted by their employers.
OregonSaves has been rolled out in phases, with the earliest deadline of November 15, 2017, applicable to employers with 50 or more employees. More recently, November 15, 2019, was the registration deadline for employers with at least five, but fewer than nine employees.
It is important to remember that OregonSaves effectively imposes two requirements:
- For employers who sponsor a qualified retirement plan, OregonSaves requires those employers to register by the applicable deadline affirming that they are exempt (by virtue of already offering a qualified retirement plan).
- For Oregon employers who do not offer a qualified retirement plan, OregonSaves requires those employers to register with OregonSaves by the applicable deadline and then (as described below) facilitate participation in OregonSaves.
How OregonSaves Works
Once a non-exempt employer has registered with OregonSaves, all full-time and part-time employees are automatically enrolled in the program unless they elect to opt out. Employers are not required to enroll employees who stop working before the end of the program's 60-day enrollment period. After-tax contributions are deducted from an employee’s paycheck and deposited into a Roth IRA that is administered by a state contractor and supervised by the Oregon Retirement Savings Board.
Employer contributions (including matching contributions) are not permitted. The accounts are subject to the same tax rules on contributions and distributions that apply to ordinary Roth IRAs. The accounts are portable and personal to employees; if an employee changes employers, he or she can continue to make contributions through payroll deductions with the new employer or independently, if the new employer is not registered with OregonSaves as a non-exempt employer.
Implications for Oregon Employers
As noted above, Oregon employers must either register with OregonSaves or certify their exemption from it by the applicable deadline (depending on the number of employees in Oregon). Employers are exempt if they sponsor a qualified retirement plan for the benefit of some or all of their employees.
Certificates of exemption are valid for three years. A "qualified retirement plan" for purposes of OregonSaves includes plans qualified under Internal Revenue Code (Code) Section 401(a) (including 401(k) plans), 403(b) plans, Simplified Employee Pension plans under Code Section 408(k), SIMPLE IRA plans, or governmental deferred compensation plans under Code Section 457(b); it does not include payroll deduction IRAs.
Employers who sponsor qualified retirement plans can also facilitate participation for their employees in OregonSaves, if they so choose. The state has also announced that it will begin automatically exempting some employers who sponsor retirement plans based on such employers' Form 5500 filings (an annual filing required with the U.S. Department of Labor under the federal Employee Retirement Income Security Act of 1974).
Employers who are not exempt from OregonSaves have the following obligations:
- Enroll participating employees;
- Accurately record contribution elections in the payroll system;
- Timely remit contributions to the plan administrator;
- Retain employee election notices for at least three years (or have the program administrator do so);
- Provide the program administrator with basic employer and employee information relevant to program participation; and
- Clearly communicate to employees in an oral or written announcement that their involvement is limited to facilitating the state-run program.
Where possible, the state has attempted to minimize the burden on employers. The state is responsible for drafting the relevant informational materials for employees. Employers can either distribute the materials themselves or delegate the task to the OregonSaves program administrator. Employers do not pay a fee for participating.
Employers Using PEOs
Final rules issued by the Oregon State Treasury provide that in a joint employment relationship, such as that between a PEO and a "client" employer, the client employer is ultimately responsible for compliance with OregonSaves. However, the final rules also state that a client employer is free to enter into an agreement with a PEO where the PEO assists the client employer with meeting compliance responsibilities under the law.
Effective January 1, 2020, non-exempt employers who fail to facilitate access for their employees to OregonSaves may be assessed penalties of up to $100 per affected employee, with a maximum penalty of $5,000 per calendar year. The penalties will be assessed by the Oregon Bureau of Labor and Industries (BOLI), and may be reduced upon a showing of mitigating circumstances.
OregonSaves does not create a private right of action for employees whose employers do not facilitate their access to the program. However, employees can report non-compliant employers to BOLI, which could trigger an investigation.
In addition, effective January 1, 2020, exempt employers will be required to certify on their annual withholding reconciliation returns that they sponsor a qualified retirement plan such that they are exempt from the requirements of OregonSaves.
Please contact your DWT attorney for more information about OregonSaves.