Two House Republicans mounted a drive Wednesday to overturn a Department of Labor rule from last year to expand state and local government-base auto-enroll IRAs for small employers.

Their effort was immediately opposed by AARP.

The rule could force workers into retirement savings plans with few protections and considerable government controls while employers would face a patchwork of regulations, contended Florida Rep. Francis Rooney, who is sponsoring measures to block the rule along with Michigan Congressman Tim Walberg.

“Many small businesses may forgo offering retirement plans altogether,” said Rooney in a press release.

However, AARP lobbyist Nancy LeaMond opened a counterattack by claiming the plans could reduce the number of people who don't have retirement plans and save taxpayers as much as $4.8 billion in the next 10 years. Currently, 55 million workers don't have pay-roll deduction retirement vehicles.

“Those who do not save enough for retirement risk becoming dependent on social safety net programs, costing taxpayers down the line,” LeaMond wrote in a letter to senators and representatives.

She noted the states are in an advantageous position to see what works and what doesn’t when they establish and run government-sponsored retirement programs for small businesses.

LeaMond asserted states have already shown that they can succeed at promoting personal financial responsibility with 529 college savings plans, which have grown to over $250 billion in assets from less than $3 billion in 20 years.

California, Illinois, Oregon, Maryland, Connecticut, Washington and New Jersey are setting up legislatively sanctioned retirement plan programs, while Alaska, Arkansas, Kansas, Montana, Nevada, Oklahoma, Tennessee and Texas are among the states considering them this year.

California’s Secure Choice is one of the furthest along of public retirement plans. However, the mandate won’t go in effect for at least two years for employers with five or more employees that don't already provide a retirement plan to offer one or give their workers access to Secure Choice.

 


The plan’s IRAs will be managed by a private-sector financial firm overseen by a board chaired by the California State Treasurer.

The Illinois plan, also called Secure Choice, raises the employee threshold to 25 workers with enrollments projected to start in 2018 or 2019.

The DOL rule helping to expand the state offerings is seen by its supporters as essential because it protects the states and employers from ERISA enforcement actions.

The plans have often received support by Republicans in the states that have them. They  view the plans as a way of keeping down social service costs by making it possible for more retirees to pay for medical and other bills out of their own pockets.

In addition to overturning the DOL effort to expand the programs, the Rooney and Walberg legislation would prohibit future administrations from enacting the same rule.