INVESTMENT

The advantages and disadvantages of Oregon save for small businesses


Launched in 2017, OregonSaves was the country’s first state-based retirement savings program. Now, its assets are more than 100 million. Even the smallest businesses need OregonSave to facilitate if they don’t offer employer-sponsored retirement plans. In fact, the deadline for employers of four or fewer employees is 2022.

1. Do I have to offer my employees OregonSaves?

No. Oregon law requires retirement benefits for businesses, but you don’t have to choose Oregon Savings. If you offer a 401 (k) plan (or other type of employer-sponsored retirement program), you can request a waiver.

2. What is OregonSaves?

OregonSaves is a Payroll Deduction IRA program – also known as the “Auto IRA” plan. Under an auto IRA plan, you must automatically enroll your employees in the program. Specifically, employers in the Oregon plan are required to automatically enroll employees with a 5% delay rate, an annual 1% increase, until their savings rate reaches 10%. All contributions are invested in Roth IRA.

As a qualified employer, you must simplify the program, set up the payroll process, and send contributions to OregonSave. The first $ 1,000 of an employee’s contribution will be invested in the OregonSaves Capital Preservation Fund and more than 1,000 1,000 in savings will be invested in the OregonSaves Target Retirement Fund based on age. Employees retain control over their Roth IRA and can customize their accounts by selecting or selecting their own contribution rates and investments. (They can be removed from the annual increase.)

3. Why would I consider Oregon Saves?

OregonSaves is a simple, straightforward way to help your employees save for retirement. Brought to you by the Oregon State Treasury, the program is overseen by the Oregon Retirement Savings Board and is managed by a program service provider. As an employer, your role is limited and there is no fee to pay your employees OregonSaves.

4. Are OregonSaves any downsides?

Yes, there are some things that might make Oregon Save less attractive than other retirement plans. Here are some important considerations:

  • OregonSaves is a Roth IRA, which means it has an income limit. If your employees earn above a certain limit, they will not be able to participate in OregonSaves. For example, if the revised consolidated 2021 total revenue exceeds 140,000, single filers will not be eligible to contribute. However, the 401 (k) plan is not subject to the same income limit.
  • OregonSaves does not cover employee protection under the ERISA – other taxable retirement savings plans – such as the 401 (k) plan under ERISA, a federal law that requires trustworthy supervision of retirement plans.
  • Employees do not receive tax benefits for their savings as opposed to a 401 (k) plan – which allows for both pre-tax and post-tax contributions – Oregonsev only allows post-tax (ROT) contributions until investment earnings in Roth IRA are withdrawn. Can be tax-suspended and eventually tax-free.
  • The contribution limit is much lower – employees can save up to $ 6,000 in an IRA in 2021 ($ 7,000 if they are 50 or older), while employees in the 401 (k) plan can save up to ,500 19,500 in 2021 (if they can save ,000 26,000). Age 50 or older). So even if workers make the most of their contribution to OregonSave, they may still have less than the amount of money they would need to achieve a financially secure retirement.
  • No employer match and / or profit sharing contribution – Employer contribution is a major incentive for employees to save for their future. 401 (k) plans allow you the flexibility of employer contributions; However, not OregonSaves.
  • Limited investment options – Oregonsevs offers relatively limited investments, which may not be suitable for all investors. General 401 (k) plans offer a wide range of investment options and often additional resources such as managed accounts and personalized advice.
  • There is no cost to employers to offer OregonSaves employing potentially higher fees for employees; However, employees pay about $ 1 per year for every $ 100 in their account depending on their investment. While different 401 (k) plans charge different fees, some plans have much lower employee fees. Fees are a big consideration because they can seriously ruin employee savings over time.

5. Why would I consider a 401 (k) plan instead of OregonSaves?

For many employers – even for very small businesses – a 401 (k) plan can be a more attractive option for a variety of reasons. As an employer, you have greater flexibility and control over your planning service providers, investments and features so that you can create a plan that best meets your company’s needs and objectives. Also, you can benefit from:

  • Tax Credit Thanks to the C Protection Act, you can now get up to $ 15,000 in tax credit to help reduce the start-up costs of your 401 (k) plan. Also, if you add a qualified auto-enrollment feature, you can earn an additional 500 1,500 tax credit. It is important to note that the proposed Protection Act 2.0 may offer more tax credits.
  • Tax deductions – If you pay for plan expenses such as administrative fees, you may be able to claim them as business tax deductions.

With a 401 (k) plan, your employees may also have more:

  • Choice – You can pay employees, regardless of income, to reduce their taxable income by making pre-tax contributions or post-tax contributions (or both!) Not only that, employees can contribute to 401 (k) plans and an IRA if they Willingly – they give more opportunities for their future than they imagine.
  • Power savings – Thanks to the higher contribution limit of the 401 (k) plan, employees can save thousands of dollars – potentially setting them up for a more secure future. Plus, if the 401 (k) plan fee is less than what a person has to pay with OregonSave, it means more employee savings are available for account growth.
  • Freedom of investment ye employees may be able to access more investment options and the necessary guidelines for investing with their confidence. For example: Betterment 500+ provides a low-cost, diversified portfolio worldwide (including focusing on making a positive impact on climate and society).
  • Support – 401 (k) Providers often provide a greater degree of support, such as educational resources on a variety of subjects. Betterment, for example, provides personalized, “always on” advice to help your employees reach their retirement goals and achieve overall financial well-being. Also, we provide your employees with an integrated view of outside assets so they can see their full financial picture – and track their progress toward all their savings goals.

6. What action should I take now?

If you decide that OregonSaves is the most suitable for your company, check out the website to register.

If you decide to explore your retirement planning options, talk to Betterment. We can help you run your plan faster and faster – and turn ongoing planning administration into a breeze. Also, our fees are much lower than the industry average. This can mean more value for your company – and more savings for your employees. Get started now.

Improvement tax advisors are not, and the information contained in this article is for informational purposes only.



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