In Oregon, since late 2017 a new program called OregonSaves has started. You can read more about how the program came to fruition on the www.oregon.gov website. If you own a small business in Oregon, you probably know much about the program.
According to other articles, the states with a similar program are: California, Connecticut, Illinois and Maryland. It remains to be seen whether other states will follow suit.
In Oregon…The OregonSaves program is being rolled out in stages, starting with larger employers, those employers/companies with 100 or more employees. By 2020, the plan will encompass much smaller firms. The roll-out will continue from 2017 to 2020.
The very basic elements of the program…Oregon employers that do not offer a retirement savings program must (emphasis on MUST) facilitate employee payroll deductions, which are then contributed to personal Roth IRAs.
For employers/businesses there is a possibility to obtain an exemption from participation in the program. Exempt employers are those that already offer a tax-qualified retirement plan, 403(b) plan or governmental 457(b) plan to some or all of their employees. Businesses must request an exemption, it is not automatic.
For the employee there is an “opt out” feature.
From the oregonsaves.com website: “You will automatically start saving a percentage of your paycheck in your own IRA (individual retirement arrangement) that will stay with you from job to job. It will always remain your money and you have total control over your account. You do not have to participate and may opt out at any time.”
It is beyond the scope of this article to offer more details about individual proposed state programs.
In general, those in government are becoming aware that many individuals are not preparing for retirement and states are coming up with ways/programs/plans to help people save for their retirement, particularly those individuals with lower incomes.
It remains to be seen how successful those programs will be.
The Oregon Experience – update
Before I was able to review and post the above article, a posting from our friends at Squared Away* came across my researcher’s desk. It offers the outlook for the Oregon plan and similar plans as they are rolled out across different states.
The Squared Away article is titled: Oregon’s IRA Gets Workers to Save (February 5, 2019) by Kim Blanton. According to the article: “The absence of a retirement plan is a particular problem at small firms, which often lack the money or staff to set up the 401(k) plans common at major employers. OregonSaves, which is mandatory (my emphasis) for employers, provides a very low-cost way to automatically enroll workers and send their payroll deductions to personal IRA accounts.”
For the employee, it offers a way to systematically save for retirement.
If the idea of small employers offering savings options for their employees catches on…”Oregon was the first state to introduce this type of program, and California, Connecticut, Illinois, and Maryland are following. New York may be next…”
Whether you agree or disagree with programs such as employer mandated IRA’s, the point to consider is that many Americans are not saving enough for retirement. One study found that 21 percent of Americans have no retirement savings, and a third of Americans have less than $5,000.
* The Squared Away blog is supported by the Center for Retirement Research at Boston College.
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