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States’ rights? Not so much, when it comes to retirement savings

Reuters

Thursday, February 16, 2017

So much for states’ rights.

The Republican-controlled Congress took aim this week at states that are creating retirement saving programs for workers who do not already have 401(k)s through their jobs. Seven states – including populous California, Illinois and Maryland – are implementing government-sponsored auto-IRA plans, and another 30 are considering their own, according to AARP, which has been supporting and tracking the initiatives.

Saving for retirement should not be all that controversial, but state plan opponents in the business community object to an expansive government role and the mandatory features of some of the state plans.

There is a lot of skepticism that if these plans don’t have a required participation feature of some sort, it won’t be enough to shift the tide.

The House of Representatives approved a resolution on Wednesday that would invalidate an important rule handed down last year by the U.S. Department of Labor (DoL) in support of the state plans. The measure now goes to the Senate. The rule exempts state plans from the Employee Retirement Income Security Act of 1974 (ERISA) if they meet certain conditions. That provides important reassurance to employers participating in the plan, who worry about compliance cost and legal liability under ERISA…

MEPs have enjoyed bipartisan support, but they would be voluntary. Few experts think they would have as much impact on coverage levels as the mandatory state IRA plans. “There is a lot of skepticism that if these plans don’t have a required participation feature of some sort, it won’t be enough to shift the tide,” said Shai Akabas, director of fiscal policy at the Bipartisan Policy Center. “There needs to be more of a gentle nudge in that direction.”

KEYWORDS: 115TH CONGRESS, 401(K)S, AARP, CALIFORNIA, DEPARTMENT OF LABOR, ILLINOIS, IRAS, MARYLAND, SHAI AKABAS