State-Sponsored Retirement Accounts Would Be Blocked by Resolutions

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By David B. Brandolph

Two House Republicans introduced resolutions to repeal federal agency rules giving states and cities the green light to require some private-sector employers to earmark retirement savings for their workers.

The resolutions seek to repeal Labor Department rules providing that employers required under state and city mandates to automatically enroll their employees in government-sponsored individual retirement accounts, won’t be considered to be in conflict with federal employee benefits law. The resolutions were introduced Feb. 7 by two members of the House Education and the Workforce Committee.

A resolution introduced by Rep. Tim Walberg (Mich.), chairman of the Subcommittee on Health, Employment, Labor, and Pensions, would repeal a rule giving a safe harbor to the state mandates. The second resolution, offered by Rep. Francis Rooney (Fla.), would repeal a rule allowing programs sponsored by municipalities in states without such a mandate.

These mandates are designed to cover employers that don’t currently offer retirement plans to their employees and are not covered by the Employee Retirement Income Security Act.

Plan sponsor groups claim that the rules are in contrast to the uniformity goals of ERISA in that plans could be subject to different requirements in each state their members work.

Group Says ERISA Plans Would Be Affected

ERISA-covered retirement plans would be forced by these state and local proposals to “alter aspects of their retirement plans to be exempt from the state or local mandate,” Will Hansen, senior vice president of retirement policy for the ERISA Industry Committee, told Bloomberg BNA. ERIC advocates for large employer plan sponsors.

For example, Hansen said, the Oregon State Retirement Savings Plan, scheduled to be implemented later this year, provides in a proposed rule a conditional exemption from the program for employers that offer a retirement plan to all employees, but only if the employer enrolls all employees within 90 days of hire. ERISA doesn’t require plan sponsors to enroll their employees so soon, setting up a need for plans to have different plan terms in each state where it has workers, Hansen said.

Tobias Read, the state treasurer of Oregon, told Bloomberg BNA he’s mystified by the disapproval resolutions. He said his state’s program is one that small employers want and need because many can’t afford to provide retirement benefits to their employees on their own.

Read said there needs to be a national approach to enhancing savings for American workers and that he’s happy to work with Congress to achieve that.

Small-Business Group Likes State, Local Approach

These state and local programs are a low-cost and efficient way to provide retirement benefits for a large segment of the workforce that lacks such savings vehicles, John C. Arensmeyer, Founder & CEO of Small Business Majority, told Bloomberg BNA. He said that 90 percent of American businesses have 10 or fewer employees.

SBM represents small businesses consisting of 100 or fewer employees.

Disapproval resolutions are permitted under the Congressional Review Act. The CRA permits Congress to pass such resolutions to block federal agencies from implementing or issuing agency rules. Agencies affected can later issue a rule on the same topic, but only after completing a full comment and review process.

.To contact the reporter on this story: David B. Brandolph in Washington at dbrandol@bna.com

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

For More Information

Rep. Walberg's resolution of disapproval is at http://edworkforce.house.gov/uploadedfiles/hj_res_66.pdf and Rep. Rooney's resolution of disapproval is at http://edworkforce.house.gov/uploadedfiles/hj_res_67.pdf.

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