What is OregonSaves, the state

Oregon created the first-of-its-kind statewide retirement program in 2017. The goal of the program was to fix a savings crisis in the state.

Tobias Read, current Oregon state treasurer, was an early champion of the program when he served in the state Legislature. The initial feasibility study found that 66% of Oregon businesses didn’t have a retirement plan for employees. And for Oregonians nearing retirement age, the average balance in their account was $12,000, according to a study from 2017.

“If that doesn’t change,” said Read, “People are faced with a pretty tough choice when they get to a typical retirement age: Retire into poverty, or don’t retire at all. And — and that’s no kind of choice.”

Related: Oregon's state-mandated retirement program has had a rocky rollout

To fix this problem, Oregon legislators had to get creative. Oregon doesn’t have the power to create a new kind of retirement account — most are regulated at the federal level. Also, the state didn’t have enough money to expand PERS, its struggling pension fund for public employees. And more than half of Oregonians work for small businesses that might not be able to shoulder the expense and complicated administration of a retirement plan like a 401(k).

So OregonSaves was built around existing retirement accounts called Roth IRAs. Workers can already get a Roth IRA independently without their employer’s help, but few do — just 3.5%, according to industry studies.

“Whereas, if people have an opportunity to save through a plan at work, 70 percent of people do that,” says Read. Currently, 76.7% of employees stay enrolled in OregonSaves when offered it by their employer.

OregonSaves defaults to employees setting aside 5% of their paycheck into their own IRA via payroll deduction, unless they choose to leave the program or change their contribution amount. Each year they are in the program, that amount saved will automatically increase by 1%. As of June 2023, the average enrollee is investing $174 per month and setting aside 6.5% of their gross income.

Businesses can exempt themselves from OregonSaves if they provide another retirement plan to employees. Unlike an employer-sponsored retirement plan, employers can’t contribute matching funds to the employee’s OregonSaves Roth IRA.

There are no administration costs for OregonSaves for employers, instead all investing fees are paid by the program participants to the OregonSaves’ private sector brokerage, Vestwell. Those fees work out to about 1% of the employee’s account balance per year — which is about double the industry average of .5% for a Roth IRA.

July 31 was the final in a series of deadlines for OregonSaves, affecting all Oregon businesses with four or fewer employees. Businesses with over 100 employees were required to join OregonSaves or register their existing retirement plans first in November 2017.

Working with those large employers first allowed the program to “build assets under management and spread the costs of administering the program over a wider base,” said Read. “And as time has passed, we’ve been able to enroll employers who have smaller numbers of employees.”

The first stage of the rollout was also with organizations large enough to have professional Human Resources departments. The enrollment deadline for small businesses with between one and four employees was originally set for May 2020. However, the COVID-19 pandemic caused the Treasury to move that deadline out several times.

The OregonSaves Deadlines as originally planned, from OregonSaves 2018 annual report.

Oregon Treasury / Oregon Treasury

In late 2021, OregonSaves abruptly announced they were changing the private firm that managed saver funds from Ascensus to Vestwell, and that all participating businesses would have to move to a new website. The transition caused the deadline to be pushed back again, and the final deadline for Oregon businesses with less than four staff moved to July 31, 2023, more than three years after the original target.

Businesses that missed the July 31 deadline to either enroll in OregonSaves or certify that they already offer another retirement plan could face penalties of $100 per employee. However, the Oregon Treasury says that as of yet, no penalties have been assessed. The Oregon statute allows for a grace period of 24 months before a penalty will be assessed.

Oregon isn’t the only state with a state mandated retirement program any longer. Now 13 states have followed suit with similar retirement programs, including California. Twenty-two other states have proposed legislation this year to copy OregonSaves to their own state.

Tags: Retirement