Saving for retirement has become increasingly difficult in recent years, and especially with the ups and downs of the economic cycle, many workers feel uncertain about their future finances.
A 2023 survey of Schwab 401k participants revealed that although American workers think they’ll need to save an average of $1.8 million for retirement, only 37% of respondents say they’re “very likely” to achieve their retirement savings goals.
Several states have implemented mandated retirement savings programs in hopes of helping their employees better save for their retirement. However, such an initiative is easier said than implemented—and a state-sponsored program may not be a good fit for every small business (or every employee, for that matter).
To help you understand whether something like OregonSaves is right for your employees, here we’ll take a closer look at the details of the program, including:
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What is OregonSaves?
OregonSaves is a state-mandated retirement program sponsored by the Beaver State. Employers that meet the mandate’s requirements must either enroll in the program or offer their employees an alternative qualifying retirement savings program, such as a 401(k).
When it launched in 2017, OregonSaves was the nation’s first state-run retirement program. It quickly grew in popularity, becoming the benchmark for 11 other states and their new retirement savings programs.
How does the OregonSaves program work?
The state-sponsored retirement savings program comes in the form of a mandatory Roth individual retirement account (or IRA, for short). This type of retirement plan is funded solely through employee after-tax contributions, which means that any money withdrawn for retirement isn’t subject to income tax.
But because the plans are structured as Roth IRAs, any non-qualified withdrawals an employee makes before the age of 59½ will result in a 10% penalty on the earnings.
Unlike employer-sponsored retirement plans, OregonSaves Roth IRAs are portable. Once enrolled, employees can generally take their accounts from job to job without fees or other repercussions.
Eligibility requirements and enrollment for employees
To participate in the OregonSaves program, employees must meet the following requirements:
- Be 18 years of age or older
- Be employed and earn income in the state of Oregon
- Be employed for at least 60 days
- Meet the eligibility requirements for opening and contributing to a Roth IRA
This means that part-time workers, seasonal employees who work for an employer for at least 60 days, and employees who don’t qualify for an employer-sponsored retirement plan can be eligible for a Roth IRA under OregonSaves. Employees in other states may also qualify for OregonSaves if their employment is based in Oregon.
Employers must enroll eligible employees in OregonSaves within 60 days of their employment date. However, employee participation in the program is voluntary, and employees can opt out (or back in) if they choose. Once they receive information about the plan from their employer, employees have a 30-day window to opt out before they’re auto-enrolled in the program.
Self-employed individuals, gig workers, and even business owners who are considered employees for tax purposes can also participate in the OregonSaves program. If you fall in this category, you may be required to enroll through the OregonSaves website since you are your own employer.
Once you create your account, you can set up your investment options and contribute to your Roth IRA.
Contribution options for employees
Employees who don’t change their contribution rates when enrolled will contribute 5% of each paycheck to their Roth IRA. Accounts with no changes made will also see a 1% increase every year on the employee’s enrollment anniversary until the contribution rate hits 10%.
If your employees are unsure where to start, they can use OregonSaves’s retirement calculator tool to help determine the best savings rate for their retirement goals and budget.
Investment options
By default, the first $1,000 of a participating employee’s contributions will be invested in a US money market fund called the OregonSaves Capital Preservation Fund. All successive contributions are invested into a target retirement fund based on the employee’s age and expected retirement date. These funds are managed by State Street Global Advisors.
Alternatively, participating employees can invest in other State Street funds, including an S&P 500 index fund and a money market fund.
More information on the investment options available through the OregonSaves program can be found on the OregonSaves website.
How to opt out of OregonSaves as an employee
If participating employees want to opt out of the program, they can do so online on the OregonSaves website, via phone by calling (844) 661-6777, or by mailing a paper copy of the employee opt-out form to the following address:
OregonSaves
PO Box 534423
Pittsburgh, PA 15253-4423
When employees opt out within the first 30 days after the enrollment date, they won’t receive an OregonSaves Roth IRA and plan contributions won’t be deducted from their paycheck. If they opt out after 30 days, their employer will receive a notification to stop future payroll deductions, and the employee can withdraw any contributions they’ve made so far.
What employers need to know about the OregonSaves program
Eligibility requirements and deadlines for employers
Under OregonSaves regulations, all private-sector companies with at least one employee in the state must register for OregonSaves or an alternative qualifying retirement savings plan within 90 days of meeting the mandate’s definition of an employer.
This may give you some breathing room to make your decision on whether to enroll in OregonSaves, since the program defines an employer as a business that either:
- Has employed a worker for 18 separate weeks in a calendar year
- Has a total payroll of $1,000 or more in a calendar quarter
However, if you’re interested in participating in OregonSaves before your company is required to, you can still enroll before the deadline as long as you’re eligible. Just follow the steps to register for an employer account outlined later on in this blog post.
Employer responsibilities under OregonSaves
Oregon employers must provide eligible employees with informational materials about the OregonSaves plan at least 30 days before the employee’s enrollment date. Employers, in turn, will receive these materials from the program administrator at least 60 days before the enrollment date.
If your company participates in OregonSaves, you’ll also need to perform certain administrative tasks, such as enrolling newly eligible employees in the program, submitting payroll contributions for participating employees, and keeping track of opt-out requests and changes in contribution rates.
Non-compliance penalties
Eligible employers must either enroll in OregonSaves or an alternative qualified retirement plan. Those that fail to comply face a fine of up to $100 per eligible employee up to a maximum of $5,000 per calendar year.
How to register your business for OregonSaves
Once your company is eligible to enroll in the OregonSaves program, you’ll receive a notification via mail or email. This notification will include an access code you’ll enter on the OregonSaves website to register your business or certify your exemption from the program (more on this below).
In addition to your access code, you’ll need to input your EIN, bank information, payroll information, and the following details for each of your employees:
- Name
- Birth date
- Social Security number (SSN) or ITIN
- Contact information
You’ll gain access to the Employer Dashboard when you complete the registration process and finish onboarding. This dashboard allows you to manage and make changes to your state-sponsored retirement plan.
For more details on registering your company for the program, review the official checklist for setting up an OregonSaves employer account.
If you already have a qualified alternative retirement plan that you will keep (or if you plan on enrolling in one), you must opt out of the OregonSaves program by filing a certificate of exemption. This can be done using the same link you use to register your business for OregonSaves.
Once you certify that your business is exempt from this requirement, your certificate will be valid for three years from the filing date—so long as you maintain a qualified plan during that period.
Benefits of the OregonSaves program
Accessible retirement savings options
The OregonSaves program removes some barriers to entry that prevent many employers from offering retirement benefits to their workforces.
Employers do not face fiduciary risk when enrolling in the plan and are not required to guarantee investment performance. There are also no administrative fees associated with enrolling in this plan, and the administrative burden is heavily reduced for participating employers.
These loosened restrictions allow more companies to offer retirement savings plans to more employees in Oregon, ensuring that as many people as possible have access to these benefits. According to an Oregon State Treasury press release from 2023, the OregonSaves program has been responsible for enrolling at least 118,000 Oregon workers in a state-mandated Roth IRA to date.
Automatic deductions for increased retirement savings
Automatic payroll deductions make saving for retirement simpler and more convenient for participating employees. There are no decisions or calculations for them to make every payday—the money is immediately taken out of their paycheck and submitted to their plan account without them needing to lift a finger.
This makes retirement security easier for employees in Oregon.
Drawbacks of the OregonSaves program
Before we can talk about the drawbacks of OregonSaves, first we need to touch on the drawbacks of Roth IRAs in general. Implementing a statewide retirement savings program using this type of retirement plan sets serious limitations on how much money employees can set aside for retirement each year.
In 2024, taxpayers can only contribute up to $7,000 across all IRA and Roth IRA accounts (or up to $8,000 if they’re 50 years of age or older). Compared to other types of retirement accounts, this threshold may prevent many people from making meaningful strides toward their retirement goals. Additionally, Roth IRAs are only available to employees under a certain income threshold.
Employers must also consider the following drawbacks of the OregonSaves program.
Annual program fees
Employees who participate in the OregonSaves retirement program can expect to pay a percentage of their account balances in administrative fees each year.
In addition to an annual asset-based fee of about 0.5% of their balance, plan participants must pay a separate administrative fee of $16 every year. These fees are automatically withdrawn from each participant’s OregonSaves account balance to help fund the administration of the employee’s account.
Although there are no fees for employees who invest in the Capital Preservation Fund, the fees that the program assesses afterward can add up, especially compared to other retirement savings plans available today.
If your employees are concerned about paying steep fees year after year, many retirement plans offer low-cost index fund options that allow them to put more of their hard-earned money into their retirement savings.
No employer match
Because employers cannot contribute to Roth IRAs, companies that enroll in the OregonSaves program can’t offer an employer match to help workers meet their retirement savings goals.
This can hurt your recruitment efforts, especially as many sought-after employees prefer to work at companies that offer competitive benefits—which often include an employer match on retirement contributions. Additionally, employers that can’t contribute to employee retirement accounts also lose the ability to write off those expenses as tax deductions for their business.
So, if these factors are important for you and your employees, consider enrolling your company in a different retirement plan.
Do businesses have to use OregonSaves?
No, employers must only meet the requirements of the OregonSaves mandate: to enroll in either the state-sponsored plan or an alternative qualified one. This means that, if they choose, employers can enroll in one of the following types of plans instead:
- 401(a)
- 401(k)
- 403(a)
- 403(b)
- 408(k)
- 408(p)
- 457(b)
Before you enroll in any retirement plan, take some time to do your research on all the options available to you. A qualified alternative retirement savings plan may be better for you and your Oregonian workforce.
After all, Gusto employer data from 2023 shows that, when forced to decide on state auto-IRA mandates, many small and mid-sized companies opt to participate in a 401(k) plan instead of the one managed by the state.
Get more out of your retirement savings plan with Gusto
If you’d like, you can add Gusto or your preferred payroll provider to your OregonSaves account to help you manage the administrative tasks you’re responsible for as an employer.
On the other hand, if you want a retirement savings plan that offers more benefits and flexibility for you and your employees, consider enrolling in a 401(k) plan through a payroll service provider like Gusto. Here are some benefits of offering a 401(k):
- Reduced cost with tax credits: Eligible businesses may be able to claim up to $16,500 in tax credits for the first three years of their 401(k)—potentially covering 100% of plan costs.
- Flexible and affordable plan options: Gusto’s growing list of 401(k) partners means plenty of plans to choose from at low price points to fit your budget
- Integrated to make life easier: Gusto payroll syncs with your 401(k) plan to make automatic deductions. Employees manage their own Gusto accounts, with access to their paystubs, W-2s, 401(k) accounts, and contribution details.
- Great benefits help you build a great team: Because 401(k) plans have higher contribution limits, employees can save more money with an employer-sponsored 401(k) than with state-mandated IRAs.
And if you’re wondering how a 401(k) plan compares to an OregonSaves IRA, we’ve broken this down for you below:
Features | 401(k) | OregonSaves IRA |
Auto-enroll | Available | 5% |
Auto-escalation | Available | 1% increase each year on enrollment anniversary up to 10% |
Payroll integration | Available | Full integration with some providers (like Gusto) |
Investment options | Large range of funds that varies based on the provider | 14 funds |
Employer matching and profit-sharing contributions | Available | No |
Investment advice | Available | No |
Taxability | Pre-tax and after-tax contributions available | Roth after-tax contributions |
Annual contribution limit | $23,000 for employees ($30,500 for those 50 and older), plus optional employer contributions | $6,500 for employees ($7,500 for those 50 and over) |
Participant fees | Varies, but often ranges between 0.5% and 2% of the plan balance annually | 0.5% of the plan balance and a $16 administrative fee annually |
If you have an existing Gusto account, learn more about our 401(k) partners here.
Create an account with Gusto today to see how else our platform can help you run your business more efficiently.