The Department of Labor moved Thursday to pave the way for states and some big cities to require auto-enroll IRAs at small businesses.

The action was met immediately by industry ire.

As Labor Department Secretary Tom Perez praised the new regulations as a new way for workers to secure their financial futures, the Financial Services Institute warned the rules could backfire.

Since state-run IRAs would save businesses money by requiring them not to contribute to the plans, FSI said some employers with plans that match employee donations might decide to end them.

The group also cautioned state-run plans will be overly expensive for small businesses and state governments to administer.

The Investment Company Institute, the mutual fund industry’s premier trade association, accused DOL of turning a blind eye to the track record of mismanagement and abuse in state programs from public employee pension plans to municipal securities disclosure.

“(The rules) exempt new state plans from bedrock investor protections that the private sector has been subject to for 40 years,” ICI complained.

The group added plans created because of the Labor Department’s action won’t significantly expand the number of workers with payroll deduction retirement savings and could put taxpayers on the hook for a bailout.

For plans to get DOL’s blessing under the new rules, states and cities would have to require small businesses to participate, employers would be barred from making contributions and employees could opt-out.

Rules to put the new retirement regime in place were finalized Thursday.

Some states have refused to consider auto IRAs for small businesses out of worries of being sanctioned for ERISA violations. DOL said the new rules should put those fears to rest.

The rules will give Oregon, Illinois and Connecticut the federal assurances they need to launch their small employer auto-enroll IRA programs next year, Boston College Center for Retirement Research Fellow Anek Belbase said.

The White House said state plans are necessary to make up for Congress’s refusal to create a federal system and mandate for small employers to have IRAs despite his pleas ever since he took office in 2009.

The Obama Administration said the number of workplaces with plans needs to expand because fewer than one third of individuals aged 65 to 74 have any savings in a retirement account, and those that do have a median savings balance of just $49,000.

While DOL has opened the door to the plans, few states are likely to rush through it. Michigan, Ohio, Pennsylvania and New York are the only states without small business IRAs in the works that still have legislative sessions this year.