As part of the government’s effort to increase retirement coverage to all American workers, the DOL says the rule “amends a similar rule related to state savings initiatives published earlier in 2016.”
“More workers saving for retirement now means more financially secure retirees in the future,” Secretary of Labor Tom Perez, said in a statement. “This is good for workers and families trying to build their nest eggs, and good for the long-term strength of the economy.”
Calling them “political subdivisions,” the final rule provides guidance for eligible cities to help them design programs by “providing a safe harbor describing circumstances in which an employer’s actions in complying with the municipal law do not result in the creation of an Employee Retirement Income Security Act compliant plan.”
Under the final rule, a limited number of cities and other political subdivisions are eligible to enact such a program if:
- Those with populations at least as large as that of the least populous of the 50 states,
- That are located in a state that does not already have a payroll deduction IRA plan of its own,
- That have experience sponsoring a plan for employees, and that meet other criteria laid out in the final rule.
Representatives from three cities – New York, Philadelphia and Seattle – have publicly expressed interest in potentially establishing programs.
“We have said many times that there is no silver bullet when it comes to solving the retirement savings issues facing workers and our nation. Increasing access to savings opportunities, improving transparency and reducing conflicts of interest in investment advice are all critically important policy tools that this administration has pursued,” Assistant Secretary of Labor Phyllis Borzi added.
“We hope that today’s rule increasing access to savings opportunities will add to the tools available for working people who want to save for retirement.”
By establishing a clear standard, it will provide “certainty” to municipalities considering action. The rule also protects workers’ rights by ensuring they have the ability to opt out of auto-enrollment arrangements, the DOL claims. The rule will go into effect 30 days after its publication in the Federal Register on December 20.