December 6, 2019
By Jennifer Cranford, CPA
OregonSaves retirement savings program launched in April 2017. OregonSaves requires an employer that does not already sponsor a qualified retirement plan to automatically enroll its workers age 18 or older in a state-managed Roth Individual Retirement Account (IRA) program. Contributions will be made by employees on a payroll-deduction basis. Employees can choose to opt out of the program.
An employer-sponsored retirement plan may include a 401(k) plan, a 403(a) plan or a SIMPLE IRA plan. These are just a few examples and other types of plans may qualify.
The timeline for implementation began in November 2017 for larger employers with 100 or more employees. The timeline for implementation is winding down:
- An employer employing 5 to 9 employees: November 15, 2019
- An employer employing 4 or fewer employees: May 15, 2020
The state will notify employers directly when they are required to register or certify that they are exempt from the program. An employer can also visit Oregon.gov/Retire for more information.
A link to the OregonSaves employer handbook is located here: https://cdn.unite529.com/jcdn/files/ORERv2/pdfs/OregonSavesEmployerHandbook.pdf
Oregon Minimum Wage
The standard Oregon minimum wage will increase $.50 as of July 1, 2019 to $11.25. Keep in mind that Oregon also has a minimum wage for the Portland Metro area and for nonurban counties.
- Portland Metro as of July 1, 2019: $12.50
- Nonurban counties as of July 1, 2019: $11.00
A summary of Oregon minimum wage rates can be found here, including future increases:
Oregon W4 Form
Effective January 1, 2020, employers are required to withhold Oregon state income tax at a flat rate of 8% if an employee fails to submit a Form OR-W-4 or Form W-4. Currently, the employer is supposed to calculate Oregon state income tax withholding based on single status with zero allowances for an employee who fails to provide a Form OR-W-4 or Form W-4.
Due to the federal Tax Cuts and Jobs Act of 2017, employees who use the federal Form W-4 to calculate Oregon withholding allowances may no longer have adequate Oregon withholding for personal income tax purposes.
It is recommended that employers obtain both a federal Form W-4 and an Oregon Form OR-W-4 from all employees, not just newly hired employees.
Eugene Council Approves Construction Excise Tax
The construction excise tax goes in to effect July 1, 2019. The initial rate is .33 percent of the assessed value of the new construction (commercial and residential), not on the value of the underlying land. The rate increases to .50 percent July 1, 2020. There is no cap on the tax. There may be a few exceptions to the tax including homes priced at less than $250,000 and affordable housing projects. The tax is due and payable prior to the issuance of any building permit.
The construction tax is expected to be allocated to fund programs related to the housing for households earning 100 percent of area medium income and below. Up to 4% of the tax may also be used to cover the city’s administrative expenses related to the construction tax. The City ordinance has not been finalized so information is subject to change.
Eugene Payroll Tax
On June 10, 2019, Eugene city councilors approved a city-wide payroll tax to fund community safety services. The payroll tax would be effective July 1, 2020. The payroll tax would be on wages paid by employers within the City of Eugene and would be paid by the employer and employee, similar to the worker’s benefit fund tax. The proposed employee rate would be .0044 of wages for wage earners above $15 per hour. The proposed employee rate would be .0030 of wages for wage earners between $12.01 and $15.00 per hour. There is an exemption for minimum wage earners.
An employee earning $14/hour would pay approximately $7/month while an employee earning $24/hour would pay approximately $18/month.
The employer rate would be either .0015 or .0021 of wages, depending on the number of employees and the annual gross payroll.
The new tax is expected to provide an additional $23.6 million to the community safety services, including police, fire, emergency medical services, municipal court and homeless services.
The new tax will be referred to voters in seven years and if not approved, it will sunset in 2028.
Contact your Kernutt Stokes, LLP professional advisor at 541.687.1170 if you have additional questions.