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California and Oregon State-Sponsored Retirement Plans

“I have several clients who are employers based in California and Oregon. Can you provide an update on the registration requirements for the CalSavers and the OregonSaves retirement savings programs? Are there any deadlines approaching?”

ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare.  We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from California is representative of a common inquiry related to state-sponsored retirement plans for private-sector workers.

As we reported in a prior Case of the Week:  State-sponsored retirement plans for private-sector workers, to date 12 states and one city have enacted laws that, generally, require certain employers without their own retirement plans to make the state-sponsored plan available to their employees. Each state has different rules so it is imperative to confer with state authorities and reference state websites for guidance. Note that some of the states’ plans have an employer registration requirement that is time sensitive. California and Oregon are examples of two such states.

California
CalSavers
 is a retirement savings program for private sector workers in California whose employers do not offer a retirement plan. Employers with five or more employees must participate in CalSavers if they do not already have a workplace retirement plan. Employers that do sponsor their own retirement plan must register their exemption from the state mandate. The following deadlines to register or claim an exemption are based on the size of the business.

Size of Business                 Deadline

Over 100 employees           September 30, 2020 (but see potential for year-end extension)[1]

Over 50 employees             June 30, 2021

5 or more employees          June 30, 2022

To register, visit www.CalSavers.com, call CalSavers Client Services at 855-650-6916 or email them at Clientservices@calsavers.com to certify an exemption. For businesses that missed the deadline and need to get caught up, please engage with the CalSavers support team immediately as they want to help. There is unofficial word that the deadline for registering as a California exempt employer has been extended to December 29, 2020. 

Oregon

Oregon has a similar employer registration requirement for its state-sponsored retirement program covering private sector workers− OregonSaves. Businesses with employees that do not offer a qualified retirement plan and are currently issuing payroll are required to implement the OregonSaves program. Most of the deadlines for registration/exemption have passed[2], but the state has indicated that its expectation at this time, given the impact of Covid-19, is for business owners to facilitate the program “as soon as you are reasonably able to do so.” Oregonian employers that sponsor a qualified retirement plan don’t have to participate in the program but must certify their exemption and renew it every three years.

Businesses can register or certify their exemption online at www.oregonsaves.com. Alternatively, they can contact the OregonSaves Client Service Team by phone at (844) 661-1256 or by email at clientservices@oregonsaves.com for assistance.

For information on state-sponsored retirement savings plans, please refer to the table below.

State/City Plan Name
1.    California California Secure Choice Retirement Savings Program
2.    Colorado Colorado Secure Savings Program
3.    Connecticut Connecticut Retirement Security Program
4.    Illinois Illinois Secure Choice Savings Program
5.    Maryland Maryland Small Business Retirement Savings Program
6.    Massachusetts Massachusetts Defined Contribution CORE Plan

 

7.    New Jersey New Jersey Small Business Retirement Marketplace

 

8.    New Mexico The New Mexico Work and Save Act

 

9.    New York New York State Secure Choice Savings Program
10. Oregon OregonSaves

 

11. Vermont Vermont Green Mountain Secure Retirement Plan

 

12. Washington Washington’s Small Business Retirement Marketplace

 

13. Seattle, WA Seattle Retirement Savings Plan

 

 

[1] Employers who missed this deadline should contact CalSavers and register as soon as possible to avoid penalties. There is unofficial word that the deadline for registering as a California exempt employer has been extended to December 29, 2020.

[2] Oregonian businesses with four or fewer employees have until January 15, 2021, to register or record their exemption.

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Rollover of Plan Loan Offsets and 402(f) Notices

“Has the IRS issued an updated model plan distribution notice to reflect the changes related to rollovers of plan loan offset amounts?”

ERISA consultants at the Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings plans, including nonqualified plans. We bring Case of the Week to you to highlight the most relevant topics affecting your business.

A recent call with a financial advisor from Illinois is representative of a common inquiry related to the special tax notice required for plan distributions under Internal Revenue Code 402(f).

Highlights of Discussion

The IRS periodically issues model plan distribution notices, also referred to as a “special tax notice,” “rollover notice” or the IRC Sec. “402(f) notice,” in order to incorporate any changes to the language as a result of law changes. As of this posting, the IRS had not issued updates to its model 402(f) notice to reflect changes in the information as a result of the Tax Cuts and Jobs Act of 2017 (TCJA-2017), effective January 1, 2018. The last model notice was issued in 2014 (Notice 2014-74).

Plan sponsors are required to provide up-to-date 402(f) notices to convey important tax information to plan participants and beneficiaries who have hit a distribution trigger under a qualified plan and may receive a payout that would be eligible for rollover (Treasury Regulation 1.402(f)-1). A 402(f) notice, in part, explains the rollover rules and describes the effects of rolling—or not rolling—an eligible rollover distribution to an IRA or another plan, including the automatic 20 percent federal tax withholding that the plan administrator must apply to an eligible rollover distribution that is not directly rolled over. Plan administrators must provide the 402(f) notice to plan participants no less than 30 days and no more than 180 days before the distribution is processed. A participant may waive the 30-day period and complete the rollover sooner.

A plan may provide that if a loan is not repaid (is in default) the participant’s account balance is reduced, or “offset,” by the unpaid portion of the loan. The value of the loan offset is treated as an actual distribution for rollover purposes and, therefore, may be eligible for rollover. In most cases, participants (or beneficiaries) who experience a loan offset can rollover an amount that equals the offset to an eligible retirement plan. Instead of the usual 60-day rollover deadline, effective January 1, 2018, as a result of TCJA-2017, if the plan loan offset is due to plan termination or severance from employment, participants have until the due date, including extensions, for filing their federal income tax returns for the year in which the offset occurs to complete a tax-free rollover (e.g., until October 15, 2019, for a 2018 plan loan offset).

Conclusion

Even though the IRS has not updated its model 402(f) to reflect the extended rollover period for certain loan offsets as a result of TCJA-2017, plan sponsors and administrators must ensure the distribution paperwork and 402(f) notices that they are currently using include language that reflects the new rollover timeframe. For those that rely on plan document providers, ask if the new 402(f) notice is available.

 

© Copyright 2021 Retirement Learning Center, all rights reserved