In July, employees in Oregon will have the option to save for retirement when they do not have retirement savings plans through their work.
Employers won’t need to offer a plan and the employees will be able to save part of their paycheck in their own personally-managed accounts, transferable from job to job.
Oregon State Treasurer Tobias Read said the program, called OregonSaves, has been making progress toward implementation and is set to begin a pilot phase in the summer.
“Those who are moving toward retirement have gotten a little bit closer, and every dollar that people aren’t saving is a dollar that’s likely to have to come from a future safety net budget,” Read said. “We’re trying to address the tsunami that’s headed toward us and make it easier for people to take control of their own financial future.”
To qualify, the employees must make less than $133,000 for a single tax filer or $196,000 for married tax filers, in accordance with the income limits for Roth Individual Retirement Accounts. People can opt-out of the automatic enrollment program, change how much they save and how they invest it.
“We feel good about the progress we’ve made, and designing our program and identifying the right structure and our partners, and we’d really would like it if Congress would let us do our work,” Read said.
The Employment Retirement Income Security Act of 1974 (ERISA) has a set of requirements on employers when they sponsor a retirement plan. Read said OregonSaves does not constitute an employer-sponsored plan.
“The employer is simply transmitting the employee’s wages to an investment administrator, and they’re not sponsoring to it, they can’t contribute to it, so we don’t think it’s an employer-sponsored plan,” Read said.
Last year under the Obama administration, the Labor Department issued a rule to clarify that ERISA was not applicable to this type of plan. Since then, the Congressional Review Act, by Newt Gingrich, has been invoked, which would rescind that rule. Read said the Congressional Review Act is not fatal to the plan.
“We think even the original ERISA provides what we refer to as a safe harbor for these plans, but it makes it less clear and more cumbersome, and we would much rather be talking to Oregonians about why this is a good program and why we’re making it easier for them to save than talking to our lawyers about why ERISA doesn’t apply,” Read said.
The Congressional Review Act passed the house and is now sitting in the Senate, but has yet to come up.
“I don’t understand why Congressional republicans would want to make it harder for people to save,” Read said. “This is as much a states’ rights issue as anything else. States of all different shades from blue to red are trying to address these issues with their own programs, and it makes no sense to me that the federal government would act to make that harder.”
Read said this program will help small businesses that want to assist their employees in saving for retirement but aren’t able to. He mentioned a sandwich shop in his hometown of Beaverton, where the owner said he’d like to have a retirement savings option for his employees, but he has a profit to make and doesn’t have the capacity.
“We’ve heard pretty consistently that small businesses want to offer retirement plans for their employees but don’t have the ability or the capacity to manage that process, so in some sense we’re serving as an assistant to the local business in that respect,” Read said. “I would guess that perhaps there’s a number of those kind of businesses in Douglas County.”
Pedotti’s Italian Restaurant in Sutherlin is one small business in Douglas County that doesn’t currently offer a retirement savings plan.
Owner Dave Pedotti said though he doesn’t know much about OregonSaves, he’s not sure if many minimum wage employees in the service industry would want to use the program.
“I would think most of them are thinking about the immediate future and how to make that dollar stretch,” Pedotti said.
Misty Russell, owner of Brix in Roseburg, said her restaurant has offered an employer-sponsored retirement savings plan for the past couple years, but only two employees have taken advantage of it.
“We’re definitely not in a position to judge what others do,” Russell said. “We’re really proud of our in-house retirement program, but virtually no employees take advantage of it.”
She said at Brix, people just aren’t interested in putting away their own money.
“I believe individuals should be able to plan for themselves, and I’m saddened to see the state continue to mandate certain things. I think there’s an overstepping of boundaries,” Russell said.
The OregonSaves pilot program will include a variety of different industries and sizes of companies across the state, before more businesses are added every few months.
While other states are exploring similar programs, Oregon is likely to be the first to implement a plan like this.
“If we do this well, it’s something we can look back on somewhere out in the future and be really proud we got this done,” Read said. “It’s the kind of thing that can add up to make a big difference, and thinking about young people who get a chance to start saving for retirement, and get in that habit, these kinds of early actions can make a big difference down the road, so I’m excited that we’ll be on the forefront.”