The Department of Labor issued final rules Thursday to help states develop payroll deduction IRA plans that don’t run afoul of the Employee Retirement Income Security Act, and issued a proposed rule to allow some larger cities to create retirement savings plans.
Complying with a directive from the White House, DOL released on Nov. 16 a proposed rule and interpretive bulletin to help guide states in developing state-run retirement plans for private-sector workers. Comments were due on the plan by Jan. 19.
Labor Secretary Thomas Perez said on a Thursday morning call with reporters that while eight states – California, Connecticut, Illinois, Maryland, New Jersey, Oregon, Massachusetts and Washington – have already passed legislation creating their own retirement savings plans, other states have voiced concerns about how to create plans that didn’t pre-empt ERISA.
“We heard from a number of states interested in doing this [setting up their own plans] … that if they did this they would be pre-empted by ERISA and it would appear that they were mandating these proposals,” Perez said on the Thursday morning call. States have been concerned about how to “establish a voluntary plan consistent with ERISA preemption principals. We believe we have provided that roadmap, and this [final rule] will enable states to set up those voluntary programs.”
The eight states that have developed their own plans is “nearly double where we were last July,” Perez said.
Jeffrey Zients, director of the National Economic Council and assistant to the president for economic policy, added on the call that while the administration has made progress, DOL’s fiduciary rule will “allow many workers to be better prepared for retirement, …“one-third of workers lack access to a workplace retirement savings plan, including half of workers at firms with fewer than 25 workers. Congress has refused to act; today we’re taking a major step so workers can save for retirement at work.”
Take just Maryland and Connecticut as examples, Zients said. “In these two states alone, 1.5 million people will be automatically enrolled in an IRA” through work, he said, and “if all states” had such plans, “tens of millions” will be able to save for retirement.
The California legislation, S. 1234, creating the California Secure Choice Retirement Savings Act, was sponsored by Sen. Kevin DeLeon and passed the State Assembly Thursday by a 52-26 vote.