Saving for retirement can be overwhelming, especially when there are too many options or insufficient guidance. If you’re an employee or employer in Oregon, there’s good news: the Oregon Retirement Plan Mandate aims to simplify the process. The State of Oregon designed it to ensure all workers can access a retirement savings plan.
This law requires most businesses to offer their own retirement plan or enroll employees in OregonSaves, the state’s program. Let’s uncover how the Oregon retirement plan mandate works, what it means for employers and employees, and the options for opting out or withdrawing from the plan.
What Is the Oregon Retirement Mandate?
OregonSaves is a state-mandated retirement plan. It's a state law that requires most employers to offer a retirement savings plan to their employees. If a business doesn’t have a private retirement plan, they must enroll their employees in OregonSaves.
The Oregon state-mandated retirement plan automatically deducts contributions from employees’ paychecks. The mandate was introduced to address the growing concern that many workers weren’t saving enough for retirement.
What does this state-mandated retirement plan mean for employees? It means easier access to a retirement savings plan without needing to set one up. For employers, it means they have a legal obligation to either offer a plan or participate in OregonSaves. If you are self-employed, the Oregon retirement plan mandate allows you to contribute to your own Roth IRA.
If your employer automatically enrolled you and you didn’t make any changes to your account, here’s what will happen after 30 days:
- 5% of your income (before taxes and deductions) will go into your retirement account.
- For the first 30 days, your money will be placed in a low-risk Capital Preservation Fund.
- After 30 days, if you haven’t chosen a different investment option, your money will automatically move to a Target Retirement Date Fund based on your birth year.
What Happens If I Opt Out of OregonSaves?
If you aren’t pleased with OregonSaves, opting out of the program as an employee is an option. If you choose to do so, no further payroll deductions will be made from your paychecks. You will no longer contribute to a retirement savings account through The Oregon retirement plan mandate program. You can start the process by filling out the OregonSaves Opt-Out form or by following the online process.
Here’s what happens when you choose to opt out:
- Your contributions will immediately stop. Once you choose Oregon to opt out, your employer will no longer deduct any portion of your paycheck for OregonSaves contributions.
- You have the option to re-enroll after an OregonSaves opt-out. Employees who opt out can always choose to rejoin the program during the state’s open enrollment periods or at any time if they change their mind.
- You won’t face any penalties. There are no fees or penalties for opting out of the program. If a business chooses not to register with the Oregon state-mandated retirement plan, it can be fined up to $100 for each affected employee, with a maximum fine of $5,000 annually.
- You still have other retirement plan options. Retirement planning in Oregon doesn’t hinge on OregonSaves. You can still choose to save for retirement through other means. Working with a financial planner in Oregon can help you set up a private IRA or contribute to a different retirement plan, if available.
- You can have annual automatic re-enrollment. OregonSaves automatically re-enrolls employees who previously opted out once every three years, giving them another chance to start saving unless they opt out again.
Some employees may opt out based on their financial situation. You should weigh the benefits of long-term retirement savings before deciding. The program is designed to help more Oregonians build a secure financial future.
Consulting with an Oregon financial advisor can help determine if this is your best choice. Employers can’t opt out of the Oregon retirement plan mandate other than offering an alternative retirement plan for employees.
Who Is Eligible for OregonSaves?
The Oregon retirement plan mandate applies to most employers in the state, regardless of size or industry. If you have at least one employee and don’t offer a qualified retirement plan, you must enroll your workers in OregonSaves.
This includes part-time and seasonal employees, if they meet the minimum age requirement of 18. You also have to be employed for at least 60 days. The program is designed to help more Oregonians build a secure financial future, ensuring everyone has an opportunity to save for retirement.
What Are OregonSaves Withdrawal Options?
Life comes with unexpected changes and events. As an employee, if you want to access the money saved in your account, you have several OregonSaves withdrawal options. This provision was put in place in case of emergency expenses.
Since OregonSaves is a Roth IRA, the rules for withdrawing funds are actually similar to those of other Roth IRAs. And it’s important to understand the OregonSaves withdrawal conditions to avoid penalties or taxes.
Here’s how OregonSaves withdrawals work:
- You get tax-free withdrawals on contributions. Since contributions are made with after-tax dollars, you can withdraw the amount you’ve contributed without paying additional taxes or penalties.
- You still must pay taxes on the withdrawal of earnings. Earnings on the contributions can also be withdrawn, but they may be subject to taxes and a 10% penalty if withdrawn before the employee turns 59 1/2 unless certain conditions are met (like a first-time home purchase or disability).
- You have required minimum distributions (RMDs). Like other retirement accounts, Roth IRAs require that withdrawals begin at a specific age. However, because it’s a Roth IRA, contributions can continue even past this age, and the account can grow tax-free.
- You have no withdrawal requirements for rollovers. You can roll over your OregonSaves account into another IRA or qualifying retirement plan. This is handy if you change jobs or want more control over their investments.
Are Employers Required to Provide a 401k in Oregon?
The Oregon retirement plan mandate requires employers to provide a qualified retirement plan. This can be a plan like a 401k or it must participate in the Oregon state-mandated retirement plan—OregonSaves.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
A Roth conversion may not be suitable for your situation. The primary goal in converting retirement assets into a Roth IRA is to reduce the future tax liability on the distributions you take in retirement, or on the distributions of your beneficiaries. The information provided is to help you determine whether or not a Roth IRA conversion may be appropriate for your particular circumstances. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor to be sure a Roth IRA conversion fits into your planning strategies.
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