One valuable item a company may offer an employee is a retirement savings plan, such as a 401k. However, retirement savings options within a company are not always available. Depending on the company's size, notably self-employed businesses, a retirement savings program may not be offered or may not suit one's needs. In 2017, a statewide retirement savings program was created called OregonSaves.
OregonSaves is a program that gives Oregon residents access to a retirement savings plan, whether it is through an employer offering or as an individual. Any size business can register voluntarily for the retirement program if they don't offer an employer-sponsored retirement plan. Individuals can obtain a Roth IRA on their own and contribute to it outside of payroll deductions. Of course, contributing to an OregonSaves Roth IRA has many benefits, as well as some consequences.
With the OregonSaves Roth IRA, employees have the option to opt-out at any time. If they do not take action within the initial 30 days, they will start saving automatically with the standard savings and investment elections. The standard savings elections are 5% of their gross income (wages before taxes and other deductions) earned and includes a 1% increase each year until they reach 10% of their gross income. They can change their savings rate at any time to as little as 1%, within the IRA limits. Employees can also make contributions to their account through their bank account or by check.
Initial contributions will be invested in the OregonSaves Capital Preservation Fund. Once the contributions are over $1,000, they will be invested in an OregonSaves Target Retirement Fund based on their age. If an employee opts out, they can still rejoin the program and begin contributing to their account at any time if they change their mind.
Since the savings account is a Roth IRA, the savings amount must be within the Roth IRA contribution limits set forth by the federal government. For 2020, the contribution limit is $6,000 per year and $7,000 per year if the employee is 50 or older. Employees are responsible for ensuring they do not go over the wage base limit, with the investment company's assistance. Since contributions are made post-tax (after-tax), the employer cannot deduct more than the amount of available compensation after completing any other payroll deductions required by law that have higher preference.
For more information regarding OregonSaves and how it works, visit www.oregonsaves.com for helpful resources. Be sure to subscribe to Symmetry Software's Newsletter for more payroll insights!