Right on schedule, last week Oregon State Treasurer Ted Wheeler presented the recommendations of the Retirement Security Task Force to the state legislature — with an eye toward ensuring that the new plans don’t discourage employers from offering ERISA-qualified plans.
The recommendations, which expand on a draft issued last month, aim to increase access, enrollment and savings by Oregonians and outline a program to achieve these goals — and one that the recommendation says “should not have the effect of discouraging employers from sponsoring qualified plans under the existing federal system.”
The report said that such a plan should have the following characteristics:
- Voluntary participation with auto-enroll, with employees notified of and provided financial education about their enrollment upon employment, with the ability to opt out.
- Auto-escalation of contribution levels with employee control. No default rate was established in the proposal.
- Contributions made from payroll deductions, with existing payroll systems used wherever possible to reduce costs. Both self-employed and unemployed individuals should be able to make contributions.
- The plan should meet the qualification requirements to receive federal and state tax deductions for the participants.
- No required employer contribution, though if possible, “voluntary employer contribution arrangements on behalf of employees should be accepted.”
- Individual accounts, with account information regularly reported to each participant.
- Accounts should be portable, allowing savers to maintain their accounts from one job to the next and during periods of unemployment or self-employment.
- Funds should be pooled and professionally managed to maximize returns for participants.
- Self-sustaining. The costs to manage the accounts should be paid from employee payroll contributions and/or account earnings.
Further Analysis
Additionally, the Task Force recommended further investigation and analysis in the following areas- Market research via RFI/RFP: Recommends that the state legislature appropriate funds for a Request for Information (RFI) or Request for Proposal (RFP) to receive input from financial service providers, experts and scholars to conduct a market analysis and program refinement and delivery. The recommendation calls the RFI to be used to “thoroughly understand the extent to which financial firms currently provide retirement savings plans with the nine recommended characteristics noted above and what impediments exist to enhance existing products.” The report specifically said that the plan “should not have the effect of discouraging employers from sponsoring qualified plans under the existing federal system.”
- Outreach to small business: Recommends undertaking a small business outreach program to “better understand the real costs and other limitations faced by small business offering retirement plans” and requests an appropriation for this purpose. Take those costs into account in considering whether tax credits or comparable incentives to offset the direct costs to employers, including nonprofits, could boost retirement savings. Recommends that any legislative consideration of incentives for employers include similar incentives for savers to boost retirement savings.
- Get legal guidance to determine that the state’s sponsorship of any retirement savings strategy complies with ERISA, and “develop a plan with enough definition and certainty to receive an expedited opinion from the U.S. Department of Labor.”
- Financial literacy considerations. Recommends additional research into the preferable components of an education program, including inclusion in public schools, employee orientations, small business resources and public awareness campaigns.
The task force was also charged with continuing to facilitate the creation and establishment of the program. The issue is expected to be on the table during the 2015 legislative session.
