The California plan's primary champion, Democratic state Senator Kevin de Leon, expressed outrage at the vote, saying taxpayers would ultimately foot the bills of people who retire without adequate savings.
"Wall Street investment firms fear their profits will take a hit ... even though the investment industry has historically ignored middle- and lower-income workers at medium- and small-sized businesses," he said in a statement.
The mutual fund, insurance and securities industries said the exemption would have denied some workers protections that are guaranteed for others.
"Denying ERISA protections to workers who are automatically enrolled would limit their legal remedies to fight against high fees or mismanagement of the plans," said Paul Schott Stevens, president of the Investment Company Institute, a trade group representing funds holding $19.3 trillion in assets and that are often used to save for retirement.
This article was provided by Reuters.