Treasury preparing to launch Oregon retirement savings plan
Proposed rules that allow businesses an easier way to help their employees save for retirement have been filed by the Oregon State Treasury this January.
In July, the Treasury is launching its new retirement program OregonSaves (formerly the Oregon Retirement Savings Plan), the first operating state-sponsored retirement savings plan.
The plan will begin with a small pilot in July 2017. It will then roll out in phases, starting in 2018 with larger businesses and then to smaller businesses.
OregonSaves will be an easier, less-costly way for employers to offer a retirement savings option to their employees. Research shows that people are 15 times more likely to save if an option is available through their work, but many employers do not have the resources and cannot afford to offer a retirement plan of their own.
Employers will not make matching contributions, nor will they have any financial obligations. Their role will be limited, mostly to passing along information provided by the state and making payroll deductions for participating employees.
Joel Metlen, public engagement manager for OregonSaves with the Oregon State Treasury, said they've made the big decisions and are gearing up for the pilots later this year, to build out to businesses starting in 2018.
"The key is we're going to get these pieces in place and test them out starting in July in two pilots, and make sure everything words," Metlen said. "People were looking for more clarification and definitions for employers and employees for what happens in some unique circumstances in various industries."
The last few months, the Treasury has been working out the rules and drafting the policy with feedback from stakeholders, employers, financial service industry and more groups — and especially outreach.
"Now we're really trying to expand those circles of people to include more and more folks, and to really start to raise awareness of this program," Metlen said. "When it appears down the line, people will know about it, what it can do for employers and employees and what they'll need to do when it comes around."
How it works
The Treasury elected Ascensus as the plan services provider for OregonSaves, and is now looking to hire relationship managers to work closely with Oregon State Treasury on starting up and running the program. Two of the positions will be located in Oregon, and another will be based out of Ascensus' offices in Massachusetts.
Ascensus is the largest independent retirement and college savings services provider in the United States, helping over 7 million Americans save for the future.
Starting in early 2018, the Treasury will begin to ask larger employers to start phasing their employees into the program. The phase-in is based on number of employees, starting with those who have more than 100, because they likely already have the business infrastructure in place so it should be easy to administer the program. By 2020, everyone should have access.
"Breaking it up by number of employees, with the phase-in two years, it'll keep it manageable on our side by not asking everybody to come into the system all at once," Metlen said. "We have plenty of time to improve the system and look for ways to improve it as we get to more unique circumstances."
Metlen said the Treasury wants to focus first on employers without any plan, because there are more than 600,000 employees working somewhere that doesn't offer any plan at all.
"When you start getting down to employers with only a couple employees, (we have to) make sure there's a way for them to do it that's extremely simply," Metlen said. "Employers who do everything manually do it all themselves. Those people with unique circumstances, we're saving for last so we have time to perfect how the program works."
Complications he's come across so far include part-time workers, or an employer whose plan doesn't start until age 21 but hires 18-year-olds.
"We've heard from folks there's cases where there's joint employment, say in the agriculture industry, there'll be an employee leasing company that will lease seasonal employees out to multiple farms," Metlen said. "In that case, you technically have two employees, one is the farm and one is the leasing company, so which one in this case would handle facilitating the program? Right now we've revisited that."
Metlen said they looked at many savings options to use for the plan, and based on the goals of the program chose a Roth IRA.
"This program is looking at what are some of the most common barriers that are keeping people from saving right now," Metlen said. "One of the main reasons people worry about putting their money in a retirement savings account, they're worried about what if something comes up and they really need that money? For us to have a way for people to get it without a tax penalty or early withdrawal is an important feature to help lower that particular barrier."
It's also a way to transfer wealth, or pass on as inheritance. Metlen said in the future, the Treasury would like to add traditional IRAs as alternative options, but will start with the basic program.
The benefit of the pilot program is making sure the employers and the Treasury understand as much as possible and can make the final program development a partnership.
"The first pilot is really to test the process to make sure it works the way we thought it was going to work," Metlen said. "We have all these learning processes based on how it works for other defining contribution plans, basing it on best practices we've seen here in the states and abroad."
The first pilot will be tested in July on a small set of employers who will be in close contact with the Treasury to walk them through the process.
"This will be our way of testing and making sure we actually have the results we want it to," Metlen said. "We'll watch to see where it works well and where it needs improvement, and help them through each step and then go back and improve those functions, features and pieces of the process they might have had trouble."
The second pilot will go live in October — without the hand-holding from the Treasury.
"Here's the program, here's everything you think you're going to need, go ahead and register and enroll your employees," Metlen said. "We shouldn't need to hold people's hands through it, they should be able to get through it on their own fairly simply because we tested this stuff out on a group."
There will still be tests and tech assistance to anyone who needs it, to iron out any trouble before going live statewide.