State-Run IRA Safe Harbor Runs Aground in Senate

Having moved to unwind the Obama administration’s safe harbor exempting municipalities’ auto-IRA programs from ERISA, it now looks as though the state-run program version will meet the same fate.

On May 3 the Senate passed H.J.Res. 66 by a vote of 50-49, echoing action taken by the House of Representatives in February. Assuming President Trump signs off (and he is expected to), that would cancel the safe harbor signed into law by President Obama last year.

The action was taken under the Congressional Review Act, which allows Congress to consider and pass legislation to overturn any significant regulation if that legislation is ultimately signed by the president. The current CRA window applies to any significant Obama-era rule that was either finalized or made effective after June 13, 2016 – including the DOL’s state plan rule, which was finalized in August 2016 and became effective in October 2016.

Republican Sens. Bob Corker (R-TN) and Todd Young (R-IN) voted with Democrats against the resolution. Vice President Mike Pence wasn’t required to break a tie because Sen. Dick Durbin (D-IL) missed the vote due to medical reasons.

Prior to the vote, Senate Majority Leader Mitch McConnell (R-KY) said the rule “would give state officials the power to force employers to enroll their employees into government-run savings plans,” while Sen. Orrin Hatch (R-UT) said that states “shouldn’t get a pass on investing potentially billions of dollars in private worker retirement assets without having to follow federal rules requiring prudent investment practices.”

Senate Finance Committee Ranking Member Ron Wyden (D-OR), whose state is furthest along with the launch of its state-run OregonSaves program, said, “The fact is, OregonSaves is simple, it’s easy to understand, and it’s exactly the kind of innovative program that’s needed to combat the savings crisis in this country. So it’s an absolute head-scratcher why the majority party in Congress would want to hang a menacing cloud over state auto-IRA programs. That’s what this resolution does. And the gut punch is going to be particularly tough on rural areas.”

Visit our state auto-IRA plan resource center!

Remember of course that the CRA won’t necessarily undo the work that has been done or stop the state-run initiatives underway – although it would potentially undermine the clarity and encouragement that the Obama administration had sought to provide these programs. Indeed, several of the programs under development have already announced their determination to forge ahead, regardless.

States that have enacted state-run IRA programs include MarylandConnecticutIllinois, Massachusetts and Oregon. While none of these programs have become operational to date, Oregon has pledged to open its program for enrollment on a pilot program basis by July 2017.

Add Your Comments


  1. Robert Shwab
    Posted May 4, 2017 at 10:26 am | Permalink

    Maryland, Connecticut and Illinois are hardly paragon’s of fiscal responsibility and prudence. State-run retirement programs without ERISA-type oversight and accountability are the path to corruption, inefficiency and misallocation of resources.

  2. Posted May 4, 2017 at 5:09 pm | Permalink

    We already have government-run retirement plans such as Social Security, 45 plus years of contributions (currently for most of us, employee contributions 6.2% of wages plus employer 6.2%) which reward us with a very low payout and… most state-run pension plans do not fare much better. Social Security should be held accountable to a fiduciary responsibility to their clients like we are.

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