State-sponsored retirement program

Bonds for State and Local Government Private Sector Retirement Plans

The Treasury Department’s Bureau of the Fiscal Service has issued final regulations making available federal retirement savings bonds to state and local government-coordinated, private sector retirement programs. These bonds, which the Treasury Department notes are also available under the federal myRA® (Roth IRA) program, will offer the interest rate earned by the Government Securities Investment Fund (G Fund) that is available to participants in the federal Thrift Savings Plan (TSP) program.


They will be available to such state and local programs for Traditional and Roth IRAs. Noting that it generally is expected that state and local government-coordinated plans will offer such diversified, risk-bearing investments as target date funds, the Fiscal Service is making available this federal retirement savings bond as a low-cost, principal-protected investment option to risk-bearing investments in such programs.


The regulations state that the Fiscal Service reserves the right to decline to issue retirement savings bonds to state or local government-sponsored programs on a case-by-case basis, based on the following considerations.

  • The structure and reasonableness of associated fees
  • Plans to control fees and expenses
  • Whether participants have reasonable access to their funds
  • Oversight of providers designated to operate state Auto-IRA programs


The final rule effective January 19, 2017, and is applicable beginning on January 13, 2017.


DOL Finalizes Guidance for Local Government-Coordinated Private Sector Plans

In what may be one of the last regulatory acts before President-elect Trump takes office, the Department of Labor (DOL) has finalized regulations governing state and local government-run retirement plans for private sector workers. Published in The Federal Register on December 20, 2016, the regulations become effective in 30 days. They provide guidance finalizing safe harbor conditions under which “political subdivisions” of states—local governments—may establish IRA-based payroll deduction programs for private sector workers whose employers do not offer a retirement plan. If following these guidelines, such programs will not be treated as employee benefit plans subject to the requirements of ERISA.


Citing data that show as many as one-third of fulltime private sector workers have no employer-sponsored retirement plan, and, recognizing that financially unprepared retirees may become dependent on taxpayer-funded state aid, states have acted on their own as a result of inaction by the U.S. Congress. Roughly half of the 50 states have moved to either pass or to propose legislation allowing the state to establish a variety of programs for the benefit of these employees. In most cases these programs have been proposed as IRA-based payroll deduction plans (Traditional or Roth IRA), and generally require all but the smallest employers to participate if they offer no other retirement plan.


The DOL issued proposed regulations in November, 2015, with final regulations issued in August, 2016. With those August final regulations came the DOL’s unexpected proposal to expand them to allow certain local governments to establish IRA-based payroll deduction programs for private sector workers if their state did not do so. Several cities, including Seattle, Philadelphia, and New York City, had approached the DOL seeking a locally-coordinated option. Finalizing this expansion is the purpose of the DOL’s December 20 final regulation.


Primary Conditions for All State and Local Government IRA Payroll Deduction Programs

While there are conditions that apply specifically to IRA-based payroll deduction programs of local governments, other conditions, such as those below, apply to all such programs, statewide or local.


  • The payroll deduction program must be established under state or local law.


  • The state or local government must be responsible for communicating and enforcing employee rights under such programs. If automatic enrollment is a component of such program, employees must be able to opt out of participation and be timely notified of this option.


  • The state or local government must be responsible for the security of payroll deductions and employee savings.


NOTE: The final regulations contain two clarifications regarding the responsibility of state and local governments to ensure security of withheld wages. First, they must ensure that amounts withheld from wages by employers are “promptly” forwarded to employee accounts. While not specifying the exact meaning of “promptly,” the DOL has established a contribution safe harbor. A deposit will be considered made promptly if made as soon as withholding can be reasonably segregated from the employer’s general assets, but no later than the last day of the month following the month of withholding. Second, states and local governments must provide an enforcement mechanism to ensure compliance with the requirement that withheld wages be deposited promptly.


  • Employers may not make contributions on behalf of employees, and apart from certain withdrawal restrictions designed to avoid “leakage,” the employer must have only limited control over employees’ IRAs.


Ministerial functions such as withholding, forwarding employee contributions, maintaining records, reporting, etc., may be performed by employers without triggering most ERISA compliance issues.


  • Employer expense reimbursement by the governing authority is permitted, but may not be structured as an incentive to establish programs.


Conditions Specific to IRA-Based Payroll Deduction Programs of Local Governments

The final DOL regulations retain elements of the August proposal, and add new provisions that will apply to local governments that establish IRA-based payroll deduction programs for private sector employees within their jurisdiction.


  • As noted above, a local government must be empowered by law to make such governing decisions.
  • A local government seeking to establish such a program must have a population at the time the program is established that is equal to the least populous state (currently Wyoming, with a population of approximately 600,000).
  • A local government may not establish a mandatory IRA-based payroll deduction program for private sector employees if the state or a local government with overlapping jurisdiction already established such a program. By contrast, local governments may, for example, adopt a mandatory IRA-based payroll deduction program in states with voluntary programs.
  • No local government may establish such a program for private sector employees unless it offers a plan or deferral program for its own governmental employees (having a plan of its own is considered by the DOL to be sufficient evidence that such unit of government is capable of coordinating a plan for private sector workers.)


The outgoing Obama administration was instrumental in prompting the DOL to provide its state and local government-coordinated plan guidance, dating back to November 2015 when proposed regulations were issued. It is not clear how the incoming Trump administration may feel about such programs.


There are both supporters and critics within the retirement industry. On the plus side is a potential broadening of the worker population accumulating assets for retirement. On the minus side is the potential for a patchwork of federal, state, and local retirement savings programs that will lead to greater complexity, rather than simplicity. Only time will tell how these conflicting needs and concerns will be resolved.

Retirement Savings Board selects Ascensus to administer the nation’s first state-based plan

Salem, OR–The Oregon Retirement Savings Plan took a major step toward its July launch this week with the selection of Ascensus as plan services provider.


The Oregon Retirement Savings Board conducted a public request for proposals this fall for a firm to manage the account records, operate the website, and receive and process the retirement payments for what will be the first operating state-sponsored retirement savings plan. The plan will be available to those Oregonians who lack a savings option at work.


After consideration of three highly qualified finalists, the Board on Tuesday approved an intent to award the contract to Ascensus, pending contract negotiations.


Pennsylvania-based Ascensus is the nation’s largest independent retirement and college savings services provider, with more than $139 billion in assets under administration. The firm is helping seven million Americans save for the future, in partnership with financial institutions.


“The Oregon Retirement Savings Plan will help build a stronger financial future for hundreds of thousands of Oregon workers,” said State Treasurer Ted Wheeler, the chairman of the Oregon Retirement Savings Board. “The administrator will be a key partner to ensure the plan works well for everyone, and the Board was impressed by the expertise and services that Ascensus will provide.”


As part of the successful bid, the company will absorb early startup costs and be repaid over the life of the contract. The company will collect a small annual fee from retirement accounts to cover the cost of administration, recordkeeping, marketing, and the package of investment options made available to retirement savers. The value of the contract ultimately will be based on the number of participants and assets invested.


“We applaud the state of Oregon for their forward thinking and leadership in creating a program that will enable many Oregonians to be able to save for a better retirement,” said Bob Guillocheau, chief executive officer of Ascensus. “We are honored to be selected as provider of the Oregon Retirement Savings Plan and are thrilled to bring our expertise, technology, and service philosophy to offer state residents the support they need to achieve their retirement goals.”


With more than 35 years of experience, Ascensus partners with financial institutions to offer tailored solutions that meet the needs of financial professionals, employers, and individuals. Ascensus specializes in recordkeeping, administrative, and program management services, supporting over 46,000 retirement plans and over 3.8 million 529 college savings accounts. It also administers more than 1.5 million IRAs and health savings accounts and is home to one of the largest ERISA consulting teams in the country.


Passed by the 2015 Legislature to address the crisis of inadequate savings, the Oregon plan will be available to those Oregonians who do not have access to a retirement savings option, such as a 401(k) plan, at work.


More than half of the Oregon workforce does not have an available retirement savings plan at work, and studies show that people are 15 times more likely to save if an option is available through payroll deductions. Workers who are eligible will automatically have a portion – initially 5 percent — of their paychecks deposited into their own secure retirement accounts, unless they opt out.


Treasury has been meeting with representatives of employers, workers, payroll administrators and consumer groups to guide the formation of the program. It is estimated that 64,000 businesses – most of them small businesses — will have employees eligible to participate in the plan.


A hearing will be Dec. 15 to collect feedback to a detailed draft of administrative rules, and written comments will be accepted through Dec. 23.


To help achieve the goal of a smooth and orderly launch, the plan will be phased in over several years and will be coupled with public education efforts. The Oregon Retirement Savings Board is seeking businesses – large and small — that want to be part of the initial pilot group of participants.


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


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.