More than a quarter of the U.S Senate — including the ranking members of the Senate HELP and Finance Committees — have asked the Obama administration to act quickly to remove “any potential uncertainty” regarding the legality of various state-based retirement programs.
The letter, addressed directly to President Obama, requests that the Department of Labor and Treasury “remove any potential uncertainty with respect to the application of federal law to the state-based reform initiatives,” and ensure that:
• the “Secure Choice Retirement Savings” programs in California and Illinois, as well “similar IRA-based programs enacted in the future,” are not preempted by ERISA;
• contributions to the savings vehicles created by those laws (and “similar IRA-based vehicles created by the laws of other states in the future”) are tax-preferred at the federal level.
The letter also asks for specific guidance on what other types of state-based IRA vehicles are not to be subject to ERISA, including information on the program features that could be adopted without triggering ERISA — noting that “such clarifications are needed as soon as possible.”
All but one of the signatories is a Democratic senator, with the exception being Bernie Sanders (I-Vermont).
The 2015 White House budget proposal set aside $6.5 million in funding for the Department of Labor, along with waiver authority, to “support state efforts to implement state-based automatic enrollment IRAs or 401(k)-type programs.”
NAPA GAC has previously expressed concerns that these state plans could have an advantage vis-à-vis private offerings, since they would not be subject to ERISA limitations, and will, of course, continue to monitor this situation.
