Benefits June 2, 2016

First State-Run Retirement Plan for Private-Sector Set to Launch

Washington State will open its plan on January 1, 2017.
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Starting January 1, 2017, Washington will be the first state to offer a state-run retirement plan for private-sector workers.

According to the Puget Sound Business Journal, the Small Business Retirement Marketplace will be an Internet site through which individuals and employees of small companies can set up retirement plans. It will operate much like the Washington Health Exchange does now for individuals to buy health insurance.                

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Through the portal, workers will be able to choose among several established retirement plan providers, which will be screened by Washington State, the news report says. The system will have no contribution minimums, and such a plan will remain with the person even when they switch jobs. It will allow employees to contribute through an employers’ payment system, so that contributions will be automatically deducted from a paycheck, but if an employer doesn’t want that, the system also can regularly deduct contributions from a person’s bank account, or individuals can make contributions when they wish.

Mark Iwry, senior advisor to the U.S. Secretary of the Treasury was in Seattle to talk about the marketplace. “For the employer [that] does not sponsor a 401(k), the retirement marketplace would make it easier to select a provider and adopt a plan,” he said, according to the news report, “with the assurance that the provider has been vetted, and the fees are not excessive.”

Last November, the U.S. Department of Labor (DOL) published a notice of proposed rulemaking and an interpretive bulletin meant to guide states as they create such retirement programs. However, retirement plan industry groups contend the DOL proposal for state-run retirement programs would result in a confusing patchwork of laws and other unintended consequences. And some say such plans will not close the retirement savings gap much. 

Research from the Center for State and Local Government Excellence (SLGE) suggests a national auto-IRA program would be more efficient.

Compliance June 2, 2016

PBGC Issues Proposed Rule for Multiemployer Plan Mergers

The proposed rule would provide guidance about the process for requesting a facilitated merger, including a request for financial assistance.
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The Pension Benefit Guaranty Corporation (PBGC) is proposing a rule to facilitate mergers of multiemployer pension plans.

The proposed rule will be published in the Federal Register Monday, June 6. It implements changes under the Multiemployer Pension Reform Act of 2014 (MPRA).                

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Section 121 of MPRA amends the existing rules under section 4231 of the Employee Retirement Income Security Act (ERISA) by adding a new section 4231(e), which clarifies PBGC’s authority to facilitate the merger of two or more multiemployer plans if certain statutory requirements are met. For purposes of section 4231(e), “facilitation” may include training, technical assistance, mediation, communication with stakeholders, and support with related requests to other government agencies.  In addition, subject to the requirements of section 4231(e)(2), PBGC may provide financial assistance (within the meaning of section 4261 of ERISA) to facilitate a merger it determines is necessary to enable one or more of the plans involved to avoid or postpone insolvency. 

The proposed rule would provide guidance about the process for requesting a facilitated merger under section 4231(e) of ERISA, including a request for financial assistance under section 4231(e)(2). The proposed rule would also reorganize and update the existing regulation.

“Plan mergers can make multiemployer pensions more stable and secure,” says PBGC Director Tom Reeder. “PBGC can help save troubled multiemployer plans before they fail. That helps plan participants and reduces the long-term costs of the pension insurance program.” Mergers can stabilize or increase the base of contributing employers, combine plan assets for more efficient investing, and reduce plan administrative costs.

The agency said its ability to provide financial assistance is constrained by its limited financial resources. PBGC will need additional resources to help all the plans that need assistance. Before assisting a merger, PBGC must determine that the merger is necessary to avoid plan insolvency, the assistance will reduce the agency’s expected long-term loss, and the assistance will not harm its ability to meet existing obligations.

Last year, the agency issued an interim final rule about allowing multiemployer plan partitions to help them avoid insolvency.

Text of the proposed rule for mergers, along with instructions for submitting comments, is here.

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