26 Senators Ask Obama to Remove Barriers to State-Based Initiatives

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;

• the retirement vehicles created by these laws and “similar IRA-based vehicles created by the laws of other states in the future” are not regarded as “plans” subject to ERISA; and

• 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.

Add Your Comments


  1. Mike Sladky
    Posted May 20, 2015 at 12:53 pm | Permalink

    What a joke! If any investor needs protection it is the individual that invest in a state run retirement plan.

    PS–I say make the Federal Thrift Savings Plan subject to the same rules and regulations as the private sector!!!

  2. Jeffrey Keessen
    Posted May 20, 2015 at 2:26 pm | Permalink

    They’ve done so well with our Social Security system, why not give them more of our retirement.

  3. Robb Smith
    Posted May 21, 2015 at 7:50 am | Permalink

    Agree with Jeffrey and Mike only more strongly (if that’s possible). Neither the Congress, the White House nor POTUS has a clue what they are doing. This is a huge mistake that will only lead to more state control of a private sector market and less job opportunities for those in the private sector retirement plans market. It will only benefit the big players such as funds, banks and service providers.

    How ironic that the worst offenders of fiduciary responsibility are the states clamoring the hardest for state-run plans (i.e. IL, CA, MA). This idea should be stopped in its tracks now before anymore damage can be done. Tell the states to “stay the hell out of ANY retirement plan business”.

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