State Sponsored Automatic IRAs Are Underway

State Sponsored Automatic IRAs Are Underway

We’ve all heard the message that Americans are not saving enough for retirement. Now, several states are trying to change that by mandating that employers offer retirement programs. So far, these programs have been structured by requiring employers facilitate deductions from employees’ paychecks if they do not already have a retirement plan. No one is requiring monetary contributions of any type from employers, either towards the program directly or as part of administrative fees.

Oregon was the first state to rollout it’s automatic IRA system. Employers in Oregon now have a tiered deadline (based on number of Oregon employees) in which they must register with OregonSaves, the state’s IRA program. Employers can opt out if certified they have an internal employee retirement program already in place. Once an employer is registered for OregonSaves, its employees will automatically be enrolled and have 5% of their pay taken out (with automatic 1% increases each year) and contributed to the state’s Roth IRA program. Employees are then free to opt-out or adjust their contribution rate. Currently, only employers with 100 or more employees working in Oregon are required to register their employees. The next deadline is fast approaching, employees with 50-99 employees need to register or submit their waiver by May 15, 2018. The remainder will continue to rollout through 2020:

  • 20-49 employees: December 15, 2018
  • 10-19 employees: May 15, 2019
  • 5-9 employees: November 15, 2019
  • 4 or fewer employees: May 15, 2020

Illinois and California are the next two states set to get their automatic IRA programs up and running. Illinois Secure Choice is set to launch this year and California Secure Choice is anticipating a 2019 launch. We anticipate more specific details on these programs in the coming months. Several other states have programs in the works, including Connecticut and Maryland. Meanwhile, New Jersey and Washington State are developing voluntary open-markets that employees can opt-in to.

Attempts to Shutdown State IRA programs

Last year, Congress repealed an Obama era U.S. Department of Labor rule that exempted state-run IRA plans from the Employee Retirement Income Security Act (ERISA). However, it is not clear what the exact impact of this decision may be. Thus far, the only impact appears to be a rather technical one; large employers in Oregon who already offer retirement programs have sued the state arguing ERISA preempts the Oregon law and they should not have to follow the law requiring them to re-certify their retirement program every three years. This suit is unlikely to halt the OregonSaves rollout.

Employers in states where IRA laws have been passed will want to pay close attention to the Oregon rollout, as well as the rollout in their own states. Other states will likely follow Oregon if their plan continues to avoid legal challenges.

Subscribe to Our Resource Center Digest

Enter your email below to receive a weekly recap of the latest articles from Paycor's Resource Center.

Check your inbox for an email confirming your subscription. Enjoy!

More to Discover

2019 HR & Compliance Web Summit: Executive Summary

2019 HR & Compliance Web Summit: Executive Summary

With 20,000+ registrations, this was Paycor’s biggest and best web summit yet!Industry experts like Jennifer McClure offered actionable insights and advice on all things HR, from self-care for the HR pro to in-the-news compliance issues. If you missed the live webinars you can watch them on our on-demand webinar page.In the meantime, here’s a quick overview of each session. 5 Steps to Become a Strategic HR Leader | Speaker: Lori Kleiman In today’s business environment only 20% of HR professionals interact with the executive suite. Lori Kleiman says it’s time to stop waiting for your gold embroidered invitation and finally take your seat on the leadership team. Ready to become a strategic HR leader? Follow this 5 step plan: Engage...

Payroll Risks and Controls: Everything You Need to Know

Payroll Risks and Controls: Everything You Need to Know

Believe it or not, running payroll is a risky business The IRS estimates that 40% of small to medium-size businesses end up paying a payroll penalty each year. Whether you’re a large organization or a small one, there’s always a risk of payroll errors leading to fines, penalties and sometimes litigation. Protect yourself from fraud and human error Businesses that run payroll on their own, especially small businesses, are at a much higher risk of being disrupted by fraudulent activity and human error. From ghost employees to hour padding to buddy punching, when a company lacks the appropriate internal controls to manage its payroll, it can run into big trouble. Here are 6 common payroll risks and controls you can implement to mitigate...

401(k) Match Limits 2019: What Payroll Administrators  Need to Know

401(k) Match Limits 2019: What Payroll Administrators Need to Know

It’s a relatively small change, but it’s a change for payroll administrators to take notice of. As of November 2018, your employees’ contribution limits for their 401(k) increased to $19,000 from $18,500. The increase raises the total annual contribution amount (employee plus employer contribution) to $56,000 or 100% of the employee’s salary if they make less than that. Most companies typically offer 3-6% in matching funds, but there is no limit to the amount an employer can contribute as long as the annual cap isn’t reached. 2018 & 2019 401(k) Match Limits Defined Contribution Plan Limits 2019 2018 Difference Maximum employee contribution $19,000 $18,500 +$500 Catch-up contribution for employees aged 50 or older $6,000 $6,000 No...

Webinar: October Web Summit - Compliance from Hire to Retire

Webinar: October Web Summit - Compliance from Hire to Retire

From managing recruiting compliance data to accurately tracking employee hours, you need a partner who can offer the right technology plus expertise to help mitigate risk. Register for this webinar to see how Paycor can help prepare you for all of the compliance challenges in managing the employee lifecycle!We will be reviewing these 4 major areas of compliance: Recruiting Hiring Payroll People Management Speaker: Brett BeilfussBrett has been the Senior Bank Marketing Program Manager for Paycor for the past three years. He works exclusively with Paycor’s Bank and CPA referral partners, whose aim is to help their clients mitigate risk.