The Senate voted 50-to-49 Thursday morning to strike down the regulation that endorses city-run auto-IRA programs. That affects Philadelphia, Seattle, and New York City, which have explored setting up retirement plans for private sector workers, though none have been enacted. The resolution now goes to President Donald Trump for his approval.
“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,” Senator Orrin Hatch, the Utah Republican and chairman of the Senate Committee on Finance, said in a statement when he introduced two resolutions this month to rescind the Obama-era rules. “These proposed regulations encourage more mandates on job creators and promote locking American workers in risky state-run plans,” Hatch said.
California says it’s ready to defy Congress. “We’re pressing forward with the program,” said Marc Lifsher, a spokesman for the Treasurer’s Office, aiming to launch Secure Choice by early 2019. “If there’s litigation, we’ll litigate.”
Other states are speaking more softly, at least for now. If the Obama administration rules are rescinded, “we in Illinois will have to evaluate next steps,” said Greg Rivara, press secretary for the Illinois State Treasurer. State of Oregon spokesman James Sinks said OregonSaves is “planning to move forward” to launch a pilot program in July of this year. “But it will be moving forward under a new cloud of legal uncertainty [that] creates headaches we don’t want to have,” Sinks said.
At issue is the Employee Retirement Income Security Act, a highly complex law enacted in 1974 to regulate retirement plans. The law, also known as Erisa, is usually interpreted as barring states from interfering in the retirement space. While the creators of state auto-IRA plans say they’re built to be compliant with Erisa and older regulations, the Obama administration eased some doubts by issuing the new regulations, bolstering the plans’ legal authority.
Without the federal government’s blessing, it’s harder to surmise how courts might rule on state auto-IRA programs. The issue has never been squarely addressed by a judge, said Michael Kreps, an Erisa expert who’s a principal at the Groom Law Group in Washington, D.C. “You can make arguments either way, and it’s going to be up to a court to decide,” he said.
Even if the states ultimately win, the controversy could discourage other states and cities from starting their own retirement programs. Meanwhile, more than 100 million U.S. workers continue to go without a workplace retirement account.
This article was provided by Bloomberg News.