Senate Resolutions Rein in State-Run Plan Regs

Federal regulations designed to help facilitate the formation of state-run retirement plans for private sector workers look more vulnerable today.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) has introduced two resolutions, S.J.Res. 32 and S.J.Res. 33, to undo the regulations published in the waning days of the Obama administration. The regulations fall within the time frame for repeal under the Congressional Review Act (CRA), meaning that passage requires just a simple majority vote, and isn’t subject to a filibuster in the Senate.

“These rules are yet another example of the previous administration’s preference for government solutions to every problem and its affinity for over-regulation and bureaucratic red tape,” Hatch said. “These proposed regulations encourage more mandates on job creators and promote locking American workers in risky state-run plans. Rolling the regulations back will give employees and small business owners more flexibility and freedom to choose how to financially invest and build a nest egg for retirement. Moreover, bipartisan, voluntary solutions exist that would address retirement coverage issues for private businesses and their employees that do not rely on government mandates or government run plans.”

House Resolutions

Last month the U.S. House of Representatives passed two identical resolutions of disapproval. H.J.Res. 66, introduced Feb. 8 by Rep. Tim Walberg (R-MI), rolls back the regulatory “safe harbor” created by the Obama administration that will result in private-sector workers being forced into government-run IRAs managed by states. H.J.Res. 67, introduced by Rep. Francis Rooney (R-FL), blocks a second regulation that extended that safe harbor to include cities and counties.

The Labor Department’s final rule outlining the circumstances in which state retirement savings programs would not be treated as creating ERISA-covered pension plans was published last August, and a second final rule was published last December expanding the safe harbor, subject to certain conditions, to cover political subdivisions.

States that have enacted similar programs are MarylandConnecticutIllinois, Massachusetts and Oregon, while Washington State and New Jersey have both launched small plan marketplaces. Approximately half the states are currently considering measures to close the retirement coverage gap.

None of these programs have become operational to date, although Oregon has pledged to open its program for enrollment on a pilot program basis by July 2017.

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One Comment

  1. Posted March 7, 2017 at 12:45 pm | Permalink

    In the name of reducing federal regulations, the Republicans are disapproving a rule that would have exempted states and large municipalities from having their auto-IRA plans regulated by the federal pension law, ERISA. And folks who ordinarily support state rights are acting to stop certain states (blue states, not coincidentally) from sponsoring their own auto-IRA plans. It’s inconsistent but not surprising–we’re seeing a classic clash between labor (and its Democratic sympathizers) with business owners (and their Republican sympathizers). One central question: should employers be the sole arbiters of whether their employees have access, through the payroll process, to a tax-deferred savings plan? As a business owner myself, I understand the resistance to outside interference. But I think the 401k industry and Republicans are short-sighted in opposing these state plans, because future budget hawks will have a good excuse to get rid of the tax expenditure for retirement savings if it’s only reaching about half of the workforce (and mainly the highest-paid half of that half). Why tempt them? The 401k industry wants a monopoly over the workplace, I get it, but its own interests might be better served in the long run by sharing the road with the auto-IRA.

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