State plans for private-sector workers are granted ‘safe harbor’ despite retirement industry concerns.
On Aug. 25, 2016, the US Department of Labor (DOL) issued final regulations that exempt state-run retirement plans for private-sector employees from the requirements of the Employee Retirement Income Security Act of 1974 (ERISA). While this will allay state fears that the plans would have to be ERISA-compliant, and thus incur additional costs, the retirement industry has reiterated numerous concerns about this development dating back before the release of the similar proposed rules last November. (For background on this issue, see my Nov. 20, 2015, blog post, "DOL riles retirement industry with ERISA exemption for state-run IRAs.")
Requirements for Safe Harbor Status
To date, eight states — California, Connecticut, Illinois, Maryland, New Jersey, Oregon, Massachusetts and Washington — have passed laws to create state-administered retirement savings programs for private-sector workers whose employers do not sponsor a retirement program. The final measure clears the way for all states to establish such plans, with requirements that the plans must be built and administered by the state, minimize the involvement of employers and have opt-out provisions from automatic enrollment for employees. Read the rest of my latest blog to learn about safe harbor status, industry concerns and more.
Jon Vogler is a Senior Analyst, Retirement Research, at Invesco Consulting.
Invesco Distributors, Inc. 09/16
