Ohio’s New Deferred Compensation Law
Governor Mike DeWine signed Senate Bill 27 on June 8, 2021, which allows Ohio state government employees to get automatic enrollment into the Ohio Public Employees Deferred Compensation Program. Designated state employers now have the authority to automatically enroll new employees into the deferred compensation program.
What is the Ohio Deferred Compensation Program?
Ohio Deferred Compensation is a supplemental compensation plan under the Internal Revenue Code Section 457 for local and state government employees and allows participants to add to an existing pension or retirement plan by saving and investing extra money for their retirement. Ohio Deferred Compensation, a public, not-for-profit organization created by state legislation, is presided over by a 13-member board of trustees comprising appointed investment experts, public employees, and retired workers.
This plan does not replace any existing retirement plan that the participants may have. A local or state government employee who is eligible for membership in any one of Ohio’s statutory retirement systems can enroll in the program. Ohio Deferred Compensation provides retirement savings plans to more than 243,000 retired and active state government employees and presently has assets of over $19 billion. It is one of the largest supplemental retirement plans under Section 457(b) in the United States.
How the New Law Works?
The new law allows designated state employers to choose if they want to automatically enroll new state employees for the program or not. The bill states that a designated employer can choose to cease automatic enrollment of employees to the deferred compensation program if it would lead to a conflict with a collective bargaining agreement between the employer and a representative body including a labor union.
An employee can be automatically enrolled in the deferred compensation program if any one of the following conditions is met after the employer chooses for automatic enrollment:
- A new employee begins his employment with the employer.
- An employee who currently is not but previously was contributing to the deferred compensation program leaves his or her employer and joins another employer who has already chosen automatic enrollment.
- A state government employee transfers from an employer who has not chosen automatic enrollment to a new employer who has chosen automatic employment.
Auto-enrollment into the deferred compensation program will allow the employees to take advantage of the program and plan better for their retirement. The bill also states that the employer that elects automatic enrollment must notify the Ohio Public Employees Deferred Compensation Board about the same. In case the employer chooses to cease automatic enrollment of new employees, the employer must notify the Ohio Public Employees Deferred Compensation Board about the date on which it will cease. The bill also states that the Ohio Public Employees Deferred Compensation Board must specify the investment options for the employees who will be enrolled automatically. The program’s board of trustees is considering a specific dollar amount for automatic enrollment instead of a specific percentage. The terms of the bill are effective immediately but it is understood that it may take up to two years to implement the same.