Your guide to the Oklahoma Prosperity Act Program

Across the United States, lawmakers are putting bills on the books to address the savings deficit experienced by many Americans. According to a survey conducted by OnePoll and paid for by Human Interest, 92% of people don’t feel like they’ll retire at their target retirement age. Unfortunately, this trend follows in the footstep of this unsettling fact: According to recent BLS data, close to one-third of private sector workers are not offered any kind of retirement plan by their employer.

That’s why states are stepping in and passing legislation regarding retirement plans. This article covers the basics of Oklahoma’s decision to join other states' ranks in this action. 

What we know about Oklahoma state retirement laws

While there were signals of plans to address Oklahoma’s savings deficit as early as 2020, the Oklahoma Prosperity Act Program (SB527) was first introduced in February 2021 and passed by the Oklahoma Senate in March 2022. 

If approved by the state’s House as currently proposed, and passed into law, this bill would mean many Oklahoma employers not currently offering a qualified plan would be legally required to offer access to a state-run individual retirement account (IRA) or provide a qualified retirement plan of their own. The impact could be felt by small and medium-sized businesses who may have delayed setting up retirement plans for their employees due to concerns about cost or administration. 

Does the program apply to small business owners?

Yes. According to the bill, any company that has been in business for at least two years, had at least 10 employees at all times in the previous year, and that does not sponsor a qualified retirement plan must make the state plan available to their workforce, or create one of their own. And after looking at other state-mandated programs—including California, Illinois, and Oregon—the future may hold deadlines for enrollment and fines for Oklahoma employers who do not comply with these requirements.

Eligibility requirements for employees are more straightforward. Under the law, workers who earn wages in Oklahoma and who are 18 or older will be automatically enrolled in the program at a default deferral rate of 3% unless they opt out. Participants can actively choose a different deferral rate. The first $1,000 of deferrals will be held in a capital preservation fund. Employees defaulted into the program will have an option to opt-out and withdraw funds from the program.  

Is the Oklahoma Prosperity Act Program good for employees?

Yes. Overall, we believe this is a positive step forward for Oklahomans. A 3% default deferral into an IRA isn’t the sole solution to the complex problem of saving for retirement, but it is something. Another important aspect of this bill, if passed, could increase the general financial wherewithal of the workforce of Oklahoma. The state would be called to develop and implement anoutreach plan to “disseminate information regarding the Program and retirement and financial education.” This could have a substantial and positive impact on workers' understanding of the importance of financial planning. 

Is the Oklahoma Prosperity Act Program good for employers?

Yes, we think so. Whether employers choose the state-run plan or create something customized for their workforce—which may be helpful for small business owners—retirement plans of all kinds can be considered net positive for employers.

In fact, Human Interest found that, among its customers, offering a 401(k) plan may lead to lower turnover rates for small to medium-sized businesses as of March 2022. Additionally, a 2021 survey found that employees ranked medical and retirement as the top benefits they considered when evaluating a compensation package—and 78% of employees rated a retirement plan as a “must-have” benefit.

Is an employer-provided 401(k) better than a state-run IRA?

There are pros and cons and reasons why an employer would choose one over the other. But in many cases, we believe the advantages of a 401(k), especially for small and medium-sized businesses, can exceed those of an IRA. For example, employers looking to maximize tax write-offs are limited by an IRA like the Oklahoma Prosperity Act Program, which does not allow employers to contribute to the plan. 401(k) plans, on the other hand, allow employers to match employee contributions or provide a profit sharing contribution, which may be deductible on an employer’s federal income tax return.

It’s also worth noting that employees can enjoy significant tax benefits when their employers offer a 401(k) because the contribution rate limits are higher than with IRAs. Ultimately, this bill and others like it are largely worker-focused. However, it is yet to be seen if, like in other states where these laws are already on the books, Oklahoma companies will decide to create their own retirement plans instead of offering the state option.

Tax advantages, however, are just one of many considerations when deciding if this is the right move. Soon (though this bill is too young to know exactly when), decision-makers in businesses across the state will have to decide for themselves.

Know your retirement plan options

According to a survey conducted in March 2022 by OnePoll paid for by Human Interest, employer-sponsored retirement plans are the most wanted after health insurance, choosing what’s right for any business is a big decision. Luckily for plan administrators, the operational overhead could be less than you’re thinking—so most of the time and effort spent setting up a 401(k) may be in the decision to offer one. 

Time will tell when the state-sponsored IRA option will be available to Oklahoma businesses. But you don’t have to wait for state legislation to pass if you want to offer a retirement plan to your employees right now. A Human Interest 401(k) may boost employee retention and help your business avoid any upcoming fines or deadlines associated with the state mandate. 

If you’re curious and want to know more about the Oklahoma Prosperity Act Program or how a 401(k) might benefit your company, contact us today. 

*Alison Hunter is an independent contractor commissioned by Human Interest to help contribute to this article.