The Oregon Retirement Savings Plan, which claims to be the first state-run 401k plan, has approved an “intent to award the contract” to service-provider giant Ascensus, pending contract negotiations, the company announced Thursday.
The plan’s 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. The plan will be available to those Oregonians who lack a 401k plan option at work.
Pennsylvania-based Ascensus bills itself as the nation’s largest independent retirement and college savings services provider, with more than $139 billion in assets under administration and seven million participants.
“The Oregon Retirement Savings Plan will help build a stronger financial future for hundreds of thousands of Oregon workers,” Oregon State Treasurer Ted Wheeler, chairman of the Oregon Retirement Savings Board, said in a statement. “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 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 401k plan retirement accounts to cover the cost of administration, recordkeeping, marketing, and the package of investment options made available to participants. 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,” added 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.”
Passed by the 2015 legislature to address what is sees as inadequate savings, the Oregon retirement 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 401k 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.
It is estimated that 64,000 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 that want to be part of the initial pilot group of participants.
The Oregon plan claims it will impose no fiduciary risk to employers, citing ERISA exemptions, and clerical responsibilities will be kept low. The 401k 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.