New York officials are championing auto-IRA legislation that would address what they say is a gaping hole in retirement savings for private-sector workers in New York City.
However, the federal government is showing signs it could challenge these jurisdictional plans under the Employee Retirement Income Security Act.
Retirement Security for All, as the initiative is called, is part of Mayor Bill de Blasio’s push for workers’ protection and benefits.
The mayoral-led initiative builds upon efforts in previous years through bills that would empower a new retirement savings board to offer individual retirement accounts for New York City businesses with 10 or more employees.
The initiative would apply to private-sector workers, a “staggering 60%” of whom have no access to a retirement plan, according to a statement from New York State Attorney General Letitia James.
An AARP representative said Monday at a media briefing heralding the legislation that there are “over 2 million people that will be covered by this law.”
The mayor’s office maintains that 40% of New Yorkers between the ages of 50 and 64 have less than $10,000 saved for retirement.
The features of the proposal consist of an IRA that would have automatic enrollment for firms that don’t already have one.
Retirement Security for All would also contain an opt-out component for employees as well as an ability to change their contribution rates, according to the proposal.
Also, the IRAs would be portable — the payroll deduction pretax savings accounts would travel with the employee from job to job.
The enrollment would cover part-time workers of 20 hours a week or more and full-time workers.
The mayor’s office envisions the retirement board managing the program to launch by the end of 2021.
The proponents of the proposed retirement plan use the example of an employee with a salary of $50,850, the median salary in the city, who invests 5% a year at a 4% return. He or she will have accumulated $146,274 in savings after 30 years, they claim.
“This innovative program will make NYC the first city in the country to provide this benefit to businesses and their employees. This plan will give hope to workers whose retirement plan is now ‘work ‘til I die,’” stated John Adler, director of the Office of Pensions and Investments and chief pension investment advisor for the mayor in a statement touting the proposal.
However, while the proposal has received a warm welcome, it has not become law.
De Blasio made a similar announcement in February 2016, working with then-Public Advocate James, who first introduced a bill in 2015 to create a retirement board charged with creating a retirement security proposal.
The bills currently under consideration, dating from 2017, would not cost employers anything, according to a statement from James.
The life insurance industry is not clamoring to embrace the bill; representatives from trade associations did not comment or said they were still reviewing it.
The industry has been skeptical in the past of state-run plans, and there are also concerns that the federal government said it might challenge the California CalSavers Retirement Savings Program for private-sector workers because it is not compliant with ERISA’s consumer protections.
Although a U.S. District judge found that CalSavers was not pre-empted by ERISA, the U.S. Department of Justice is weighing in before a final ruling on the case, according to news and industry association reports.
DOJ filed a statement of interest in the case on Sept. 13.
The DOJ is seeking a “correct and uniform interpretation of the extent of ERISA preemption” in “promoting the voluntary establishment of employer-sponsored retirement plans with nationally uniform standards of administration,” the filing declared.