The Investment Company Institute likes what it sees in two Congressional resolutions introduced last week to block the advancement of state-run 401ks and similar retirement plans. The resolutions took specific aim at ERISA safe harbor exemptions such 401ks would employ.
“We applaud the House of Representatives for passing two resolutions to restore consumer protections under the Employee Retirement Income Security Act (ERISA) for private sector workers who are automatically enrolled in new state- or municipal-run retirement plans,” ICI president and CEO Paul Schott Stevens said in a statement released on Wednesday. “We urge the Senate to follow suit, to ensure that these untested retirement programs are required to follow the same consumer protections that have governed employer-sponsored plans for the past 40 years.”
Rep. Tim Walberg, R-Michigan, and Rep. Francis Rooney, R-Florida, claim state-run proposals and plans would “jeopardize small business retirement plans, put taxpayers at risk, and undermine the retirement security of working families.”
“In the final months of the Obama administration, the Department of Labor (DOL) created a regulatory loophole that will ultimately force workers into government-run Individual Retirement Accounts (IRAs) without the consumer protections provided by the Employee Retirement Income Security Act (ERISA),” according to H. J. Res 66 and H. J. Res 67.
They further allege that “Concerns have been raised that the department’s actions will discourage small businesses from offering private-sector plans and leave working families with less retirement security, inadequate safeguards, and limited control over their retirement savings.”
Under the Congressional Review Act, Congress may pass a resolution of disapproval to prevent, with the full force of law, a federal agency from implementing a rule or issuing a rule that is substantially the same without congressional authorization.
Their objections center on the Obama administration’s finalized regulations establishing a “safe harbor” from rules they say would pave the way to government-run IRAs to be managed by states and certain municipalities, and some employers would be forced to automatically enroll workers in government-run IRAs through payroll deductions.
Unlike private-sector retirement plans, they argue, workers enrolled in these public-sector plans would not be afforded the important protections provided by ERISA.