A pair of congressman introduced joint resolutions on Wednesday to block the advancement of state-run 401ks and similar retirement plans, taking specific exception to the ERISA safe harbor exemptions such plans would employ.
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.
“Our nation faces difficult retirement challenges, but more government isn’t the solution,” Chairman Walberg said.
The resolution he introduced (H. J. Res 66) would roll back the regulatory “safe harbor” created by the Obama administration that will result in private-sector workers being forced into government-run IRAs managed by states.
“This last-minute regulatory loophole created by the previous administration will lead to harmful consequences for both workers and employers,” Rep. Rooney added.
Rep. Rooney’s resolution (H. J. Res 67) would block a second regulation that extended the “safe harbor” to include cities and counties. Both resolutions would prevent a future administration from promulgating similar regulations.
Advocacy organizations objected, with AARP sending a letter to members of Congress, urging them to vote no.
In the letter, AARP Executive Vice President Nancy A. LeaMond noted that state initiatives have developed in recent years after a lack of progress on other action to increase retirement savings. The AARP letter noted that employees are 15 times more likely to save if they have access to a payroll deduction savings plan at work.
Seven states have approved private sector workplace programs—Illinois, Oregon, California, Maryland, Connecticut, Washington, and New Jersey.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
