Voluntary contributions questions

Q1: What are voluntary contributions?

As part of the Senate Bill 1049 Member (IAP) Redirect program, currently employed members who earn more than the monthly salary requirement can elect to contribute after-tax dollars to their Individual Account Program (IAP) account to offset the amount of their 6% monthly contribution that is being redirected to their Employee Pension Stability Account (EPSA) (2.5% for Tier One/Two and 0.75% for OPSRP).

Employers, once alerted via work items in EDX, are required to deduct IAP voluntary contributions from members’ qualifying paychecks.

Q2: Is the after-tax voluntary contribution amount the same amount redirected to the EPSA?

Yes. The member has no choice in how much they can voluntarily contribute through this option. It is either 2.5% of qualifying salary for Tier One/Tier Two members or 0.75% of qualifying salary for OPSRP members.

Q3: When can voluntary contributions start?

Members can elect to start or stop voluntary contributions any time.

Members’ IAP contributions began being redirected to their EPSA on salary paid on or after July 1, 2020. Voluntary contributions were also in effect on July 1, but, because of programming requirements in Online Member Services (OMS), PERS was not able to accept voluntary contribution elections until late September 2020. There was a limited retroactive election option, available until October 31, that enabled members to elect to make voluntary contributions back to July 1.

Please refer to the Member Redirect Voluntary Contributions Process Map: Employer View and question 5 for more details.

Q4: To enact these changes, was there a redesign to EDX? An EDX file format change? Changes to the Detail 1 or Detail 2 structure?

PERS updated EDX in September 2020 to add IAP voluntary contribution information for employees and also new work list items. Learn more in the article ”Member Redirect: How to start an employee’s voluntary contributions to their IAP” in the October 2020 Employer News.

There was no EDX file format change. There also was no change to the Detail 1 or Detail 2 record format. Refer to the Member Redirect Voluntary Contributions Process Map: Employer View for details.

Although changes to the way an employer reports contributions to PERS are not necessary through this effort, employers do have processes for starting and stopping a member’s voluntary contribution request. See question 5 for more details.

Q5: What can employers expect after an employee completes a voluntary contribution election in OMS?

Employers will receive a work item to notify them that a member with an open employment segment has elected to make voluntary contributions. Employers should begin to withhold the after-tax voluntary contribution from the employee’s paychecks as of the effective date in the work item.

A voluntary contribution employer invoice for IAP dollars is created automatically once a member:

1. Elects to make voluntary contributions.
2. Reaches their voluntary contribution effective start date.
3. Is eligible, based on being paid qualifying salary in excess of the monthly salary requirement, therefore having a portion of their IAP contributions redirected.

Learn more about the process on the How to Manage an Employee’s Voluntary Contribution webpage.

Q6: What if an employee wants to stop making voluntary contributions?

Employees can use OMS to request to stop IAP voluntary contributions.

Stopping an election works the same way as starting an election, giving the member and employer at least a full month to stop deductions.

Q7: Because this is an after-tax deduction, are these contributions included in any IRS limits for retirement contributions?

Yes. Any after-tax contributions made through voluntary contributions would be subject to the same existing IRS retirement plan contribution limit for IAP. These after-tax contributions, however, do not affect a contribution limit under a 457(b) plan or a 403(b) plan, which may also be offered by the employer.

Q8: How do I report voluntary contributions on a W-2?

PERS does not provide tax advice. Consult your own tax advisors for assistance.

Q9: Will employers have to pay earnings on the retroactive contributions?

As with all contributions, PERS credits earnings on an annual basis, after the year officially closes at of the end of February each year. Earnings on voluntary contributions for the year are credited in March. If you do not pay contributions when they are due, you will be invoiced for earnings for retroactive contributions.

Q10: What if PERS receives new data that changes previously reported salary, which, in turn, changes whether the member is eligible for voluntary contributions or not?

The system is programmed to recognize a change in salary for a member who has a voluntary contribution election. The system automatically determines whether an invoice should be created or if dollars already received should be credited back to the employer.

If a member does not make more than the monthly salary requirement and after-tax voluntary contributions were deducted, the employer will be responsible for refunding the member.

Contact your PERS Employer Service Center representative for additional support, if needed.

Q11: Can employers encourage employees to look at other options available?

Yes. Please work with employees to help them understand all the options available to save more for retirement. You may offer other 457(b) or 403(b) options that may not be restricted to set percentages or salary amounts or by after-tax contributions that reduce their take-home pay.

This information is for general informational purposes only and is not intended to provide legal or financial advice. If there is any conflict between this information and federal law, Oregon law, or administrative rules, the laws and rules shall prevail.