The Senate has passed a resolution to undo rules that aimed to help municipalities and states set up payroll deduction retirement plans that automatically enrolled private-sector workers lacking access to such savings programs. The legislative move earned it praise from several industry groups.
Like a similar resolution in the House, the Senate’s proposal seeks to roll back a Labor Department rule exempting city- and state-run retirement savings programs for private-sector employees from the strong saver protections of the Employee Retirement Income Security Act, according to the Investment Company Institute.
The House passed the legislation on Feb. 15.
“Workers who are automatically enrolled in any state- or city-run retirement program need the same bedrock investor protections that workers in private-sector plans have enjoyed for more than 40 years,” said Investment Company Institute President & CEO Paul Schott Stevens, in a statement.
“The Department of Labor’s [earlier] rules would limit these workers’ ability to address a host of issues, including unreasonable fees and malfeasance,” Stevens explained. “These protections are especially important in light of ICI’s findings that proposed state and city plans rest on shaky economic foundations. Congress is right to eliminate these special carve-outs.”
Sen. Orrin Hatch, R-Utah, argued that the Obama-era regulations, as proposed, “break over 42 years of precedent and allow states to forgo protecting the savings of employees in the private sector and instead encourage states to require businesses to enroll employees in state-run plans.”
The House approved two resolutions expressing its disapproval of the previous proposals earlier this year.
According to the Insured Retirement Institute, “In taking this action, the Senate has ensured that the high level of ERISA protections workers receive when they participate in a workplace retirement savings plan, including those sponsored by municipal governments, as well as private employer-sponsored plans, will be maintained.”
The Senate’s action also removes “the unfair competitive advantage this rule created for municipal-run plans to use automatic savings features, which private-sector employers are currently prohibited from using for their plan participants,” said IRI President and CEO Cathy Weatherford in a statement.