City and State Retirement Plans May Be Able to Coexist

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By Kristen Ricaurte Knebel

Oct. 5 — Retirement plans run by states and cities have the potential to harmoniously coexist under new DOL rules, provided some lines are drawn to prevent overlap, commenters supporting the rules said.

While a lot of employers provide their workers with retirement benefits, many Americans still lag behind on saving for retirement because their employer doesn’t provide a plan. The Department of Labor tried to address the retirement coverage gap by finalizing regulations in late August allowing states to start retirement programs for workers who don’t currently have access through their employer and offering proposed rules that would do the same for localities of a certain size in states that haven’t set up their own programs.

Other States and Cities Expressing Support for the DOL Proposal

-- New York-- Philadelphia-- Oregon

Employer and retirement groups had some misgivings about letting cities establish their own retirement plans when state plans have barely gotten off the ground, but several major cities— New York, Seattle and Philadelphia among them—expressed support for the DOL’s proposal in comment letters.

Seattle and Washington May Be Test Case

The case of Seattle and Washington state is a particularly interesting one. Seattle would like to set up its own retirement program for workers who lack access to those benefits through their employer, but under the DOL’s proposed rules they can’t, because Washington already has a small business retirement marketplace. Representatives from Seattle and Washington said in comment letters that the state’s marketplace program is different from the state-based programs contemplated in the proposed rules and shouldn’t preclude Seattle or another political subdivision from setting up their own retirement programs.

As the proposed rules currently stand, “Seattle would not qualify for the safe harbor established in this Proposed Rule because it excludes political subdivisions located in a state that has any type of statewide retirement savings program,” Tim Burgess, chair of Seattle’s Employees Retirement System Board of Administration, said in his comment letter on the proposal.

While Washington’s marketplace is “helpful” for small businesses trying to establish their own retirement savings plans, it doesn’t provide for automatic enrollment, which means it could still leave a large portion of the state without access to a retirement plan, Burgess said.

The DOL Wants to Avoid Overlap

The proposal could be modified in a way that would allow a city like Seattle to set up its own retirement program and still meet the DOL’s goal of curtailing an overlap between state and city plans. The way to do this would be to exclude political subdivisions only in states that have automatic individual retirement account programs, he said.

Washington state, in its comment letter, also supported the idea of allowing cities and other municipalities to operate retirement programs in states that have marketplace style retirement systems.

The Seattle-based Economic Opportunity Institute also asked the DOL to change the proposed rules to allow certain cities to establish their own retirement programs, even if their states have retirement programs.

“EOI does not believe that the Marketplace would overlap or be duplicative of a Secure Choice program established by a Washington State political subdivision because employer participation in the Marketplace is voluntary and those employers who choose to establish such a plan would be excluded from the Secure Choice program established by the political subdivision,” the group said in its comment letter.

Oregon, a state that is planning to roll out its own retirement savings program to a pilot group in 2017, also gave its support to the proposed rules for municipalities, saying in its comment letter that “expansion of safe harbor to political subdivisions will increase retirement savings.”

The state suggested some tweaks to the proposal could help further reduce any overlap between state and local plans, but didn’t really give concrete suggestions as to how that could be done.

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

For More Information

Seattle’s comment letter is at and Washington’s comment letter can be found at

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