Compliance

Senate Joins House In Opposing State-Plans for Private Sector

Many providers have supported the moves by the House and Senate to effectively slow the creation of state- and city-run retirement plans for the private sector, but other parties are severely disappointed by these actions.

By John Manganaro editors@plansponsor.com | May 04, 2017
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A resolution passed by the U.S. Senate is the latest step forward in the wider effort to roll back the regulatory safe harbors created by the Obama administration’s Department of Labor (DOL) to exempt from the Employee Retirement Income Security Act (ERISA) state- and city-run retirement plans created for private-sector workers.

The Obama administration had adopted the safe harbors to make it easier and safer, from a litigation perspective, for states and cities to step up and support small business employees by offering an opportunity to save for retirement via payroll deductions into tax-deferred accounts. The House of Representatives has already approved essentially the same measure, and President Trump has pledged to do as much as he can to remove financial/labor regulations implemented by his predecessor. And so it appears likely the combined efforts will succeed, sealing the fate of the Obama-era rules.  

Many providers have supported the moves by the House and Senate to effectively slow the creation of state- and city-run retirement plans for the private sector, but other parties are severely disappointed by these actions. They suggest the legislation on state- and city-plans in some clear respects conflicts with the Republican majority’s attack on the DOL fiduciary rule. On the one hand, the argument is that these state- or municipality-run retirement plans would not offer enough protections to main street investors if they are not subject to ERISA; on the other hand, the same group of lawmakers and lobbyists is fighting the fiduciary rule because, they say, it would be too burdensome to subject brokers and other providers to fiduciary standards under ERISA for the first time.

At the very least it can be argued that there is a clouded message on retirement regulation coming from the majority party in Congress. That overall picture is further obscured by the wider conversation about tax reform and the treatment of retirement investments from that perspective. There are now serious proposals being discussed by Republican House and Senate members to dramatically roll back the availability of tax-deferred retirement savings, mainly in order to pay for a lower corporate tax rate and other initiatives.

NEXT: Gauging the industry reaction 

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