Oregon Weighs State Retirement Savings Plan

Oregon has joined the states that are weighing the establishment of a state retirement plan to cover private-sector employees whose employers do not offer a retirement plan. Following a now-familiar formula, Senate Bill 615 and House Bill 2960 would establish the Oregon Retirement Savings Plan and create an Oregon Retirement Savings Board to develop and run it.

The Plan

The legislation says that the plan would:

• allow eligible individuals employed for compensation to contribute to an account established under the plan through payroll deduction;
• require an employer to offer its employees the opportunity to contribute to the plan through payroll deductions unless it offers an alternative retirement plan to its employees that meets requirements the board sets;
• provide for automatic enrollment of employees;
• allow employees to opt out of the plan;
• have a default contribution rate set by the board by rule;
• offer default escalation of contribution levels that can be increased or decreased by the employee within the limits the federal Internal Revenue Code (IRC) allows;
• provide for contributions to the plan to be deposited directly with the investment administrator for the plan;
• whenever possible, use existing employer and public infrastructure to facilitate contributions to the plan;
• qualify for the favorable federal tax treatment ordinarily accorded to IRAs and comply with federal IRC Section 408 and all other relevant laws and regulations;
• require no employer contributions to employee accounts;
• require the maintenance of separate records and accounting for each employee account;
• provide for reports on the status of employee accounts to be provided to employees at least annually;
• allow for account owners to maintain an account regardless of place of employment and to roll over funds into other retirement accounts;
• pool accounts established under the plan for investment;
• be professionally managed;
• provide that the state of Oregon and employers that participate in the plan have no proprietary interest in the contributions to or earnings on amounts contributed to accounts established under the plan;
• provide that the Oregon Retirement Savings Board is the trustee of all contributions and earnings on amounts contributed to accounts established under the plan;
• not impose any duties under ERISA on employers;
• keep administration fees in the plan low;
• ensure that the earnings on contributions of enrollees are exempt from federal and state income taxation until the moneys are disbursed to the account holder; and
• allow the use of private-sector partnerships to administer and invest the contributions to the plan under the supervision and guidance of the board.

The Board

The legislation also says that before establishing the plan, the board must:

• conduct a market analysis to determine the plan’s feasibility and whether and to what extent plans similar to it already exist in the private market;
• obtain legal advice regarding the applicability of ERISA and the IRC;
• investigate whether employers that are not required to participate in the plan can make the plan available to their employees; and
• investigate how to allow individuals who are not automatically enrolled in the plan to opt in to the plan and make contributions to an account, either through payroll contributions or another method of contribution.

The legislation would require the board to submit a report to an Assembly committee or interim committee on or before Dec. 31, 2016 concerning:

• the results of the market analysis;
• the findings from legal advice the board obtained;
• an analysis of potential costs to employers;
• a draft of the request for proposals to solicit bids from plan administrators;
• a timeline for implementation;
• an overview of any contracts the board entered; and 
• recommendations to the Assembly regarding ways to increase financial literacy in Oregon.

Under the terms of the legislation, the plan, the board, each board member and the State of Oregon may not guarantee any rate of return or any interest rate on any contribution, nor may they be liable for any loss incurred by any person as a result of participating in the plan.

Status

Senate Bill 615 was introduced on Feb. 10; House Bill 2960 was introduced the next day. The Senate measure is now before the Senate Business and Transportation Committee, which has held a public hearing and held work sessions on the bill on March 24 and 25. The House version is before the House Business and Labor Committee, which has scheduled a work session on it.

Timing

The legislation calls the plan necessary “for the immediate preservation of the public peace, health and safety,” and declares an emergency to exist, and says it would take effect immediately if enacted.
If the legislation is enacted, the board is to establish the plan so individuals may begin making contributions to the plan no later than June 16, 2017.