State Retirement Mandates & OregonSaves

As of May 2023, all businesses with three or more employees are affected by OregonSaves legislation. Employers with one to two employees have until July 31, 2023, to register for the program or certify an exemption by having a qualified alternative plan.  

According to the program’s details, these types of plans are qualified alternatives to OregonSaves: 

• A plan qualified under Internal Revenue Code sections 401(a) (including a 401(k) plan) 
• A qualified annuity plan under section 403(a)  
• A tax-sheltered annuity plan under section 403(b) 
• A Simplified Employee Pension plan under section 408(k) 
• A SIMPLE IRA plan under section 408(p) 
• A governmental deferred compensation plan under section 457(b).   

It does not include payroll deduction IRAs.

Program details 

OregonSaves offers a Roth Individual Retirement Account (Roth IRA). Any worker in Oregon over the age of 18 is eligible to participate in the program. It is also available to self-employed individuals, part-time workers, and seasonal employees who have worked more than 60 days. 

While there is no cost to employers for offering the plan, OregonSaves charges a 1% annual program fee. 

Because OregonSaves is a Roth plan, taxes are taken out before they are added to the account meaning contributions are not tax deductible. But distributions are tax free once the account owner reaches retirement age. 

State plans vs. 401(k) 

Businesses in states with retirement mandates have the option to exempt themselves from the state’s plan by offering another type of qualifying retirement plan. 

A common question from businesses when researching retirement options for their employees is, what’s the difference between the state-offered plan and my other options?  

• Employee savings: Employees are able to save more money with a 401(k) plan. For 2023, the IRS contribution limit for an IRA is only $6,500 ($7,500 if age 50 or over), while the limit for 401(k) deferrals is $22,500 ($30,000 if age 50 or over). This means employees aren’t able to save as much toward financial freedom with the state-run options.
• Administrative work: State-run plans require employers to handle many administrative responsibilities, including manually sending employees’ contributions to the plan with each round of payroll. Private plans offer payroll integrations that automate the process for you and handle other administrative and compliance-related tasks. 
• Cost: State-run plans like OregonSaves cost nothing for employers who offer the plan. While it may be free to run, the many administrative tasks that come with managing the plan can turn into a financial burden in terms of administrative man-hours. 
• Employer contributions: OregonSaves does not give employers the ability to offer employer matches, but a 401(k) plan does.2 An employer match can help attract and retain talent and provide take advantages for employers.

What happens if businesses don’t comply with OregonSaves? 

If an employer fails to comply with OregonSaves state retirement mandate, they may face penalties. The penalty for the first year of noncompliance is $100 per eligible employee, per year. The penalty increases to $200 per eligible employee, per year for the second year of noncompliance, and increases again to $500 per eligible employee per year for each subsequent year of noncompliance.  

In addition to monetary penalties, an employer who continues to fail to comply with the mandate may face legal action, including the possibility of a court order to comply and pay additional fines.