Retirement Savings Plan Set to Launch in July 2017

Flexible and simple: Employer feedback helps design key elements of retirement savings plan, set to launch in July 2017.
 
Retirement Savings Board approves framework that includes a phase-in for smaller employers.
 
The voices of employers statewide are influencing the design of the landmark Oregon Retirement Savings Plan, which will provide potentially 1 million workers with the opportunity to save for more secure futures.
 
The plan, approved by the 2015 Legislature, is scheduled to begin enrolling Oregon workers in July 2017.
 
In preparation, the Oregon Retirement Savings Board on Tuesday chose several details about how the plan will work. The framework was guided by feedback from Oregon employers large and small who participated in meetings and data-gathering interviews with the Center for Retirement Research at Boston College. The surveys were conducted between April and June as part of a feasibility study.
 
The state-administered program is being designed to offer a worry-free way to save for retirement to Oregon workers who are not offered a retirement savings avenue through their place of employment. Research shows that roughly half of Oregon’s workforce lacks such an option today, adding up to more than 1 million people. According to statistics, people are 14 times more likely to save for retirement when that opportunity is available at work.
 
“Employers and workers say that Oregonians should have a simple way to save for a more secure future,” said State Treasurer Ted Wheeler, the chairman of the Oregon Retirement Savings Board. “If you spend a lifetime at work, you should be able to spend your golden years in relative comfort.”
 
Estimates released Tuesday say the Retirement Savings Plan is expected to grow to more than 500,000 active accounts by 2032.
 
The details endorsed by the Board include:
· The plan will be simple, flexible and easy to administer for employers and also the state.
· The format of investment will be a Roth Individual Retirement Account (Roth-IRA). Those accounts are funded with after-tax dollars, grow tax-free and qualified withdrawals are tax-free.
· The savings rate will be 5 percent of wages for new enrollees, unless workers choose a different level.
· Annual auto-escalation of the savings rate will start at a later date.
· The plan will be open to employees 18 and older.
· Unless investors choose otherwise, money will be invested in age-based funds with risk profiles that evolve over time, based on the years to retirement. Investors also will be able to choose a stable value or stock index growth option.
· Workers at larger employers will be first to start saving at the time of launch in July 2017. The plan will be phased in over several years, and workers at smaller employers will be added at later dates.
 
To help evaluate the plan provider and to recommend and monitor the menu of funds that will be available to Retirement Savings Plan participants, the board selected New York-based Segal RogersCasey as general investment consultant.
 
In addition to helping workers invest their own money, the Oregon-administered plan will help to reduce the anticipated financial strain on public services caused by a widespread lack of adequate savings. Retirement savings rates are lower among women, minorities and people with a high school education level or less. Insufficient retirement savings can force tough sacrifices, such as skimping on food, housing and health care.
 
The median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households, according to the National Institute for Retirement Security. The U.S. Government Accountability Office found in 2015 that 29 percent of Americans, ages 55 and older, haven’t saved anything at all.
 
The Oregon plan will impose no fiduciary risk to employers, and clerical responsibilities will be kept low. The plan will not be a pension, will not be connected in any way to the Oregon Public Employee Retirement Fund, and will not offer any matching funds or any guarantee of performance by the state or employers.
 
Learn more about the plan at www.oregon.gov/retire.
 
The state-administered option will serve a population that is not being served by existing retirement-savings plans. The program also includes a strong priority of improving financial literacy to encourage more robust retirement savings for all Oregonians — and to make smart savings choices. A key goal of the program is to promote a new Oregon culture of saving.
 
The Oregon State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are set by the Oregon Investment Council. The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can learn more about the Oregon Treasury and Oregon Retirement Savings Plan on Twitter at @OregonTreasury.