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State Auto IRA Plans May Limp Forward Despite Losing ERISA Exemption

state auto ira plans

 

State auto IRA plans will in all likelihood not be exempt from ERISA as Obama-era safe harbor exemptions for those plans have all but been rescinded by the Congress and President Trump has vowed to sign the legislation into law.

Despite the fact that Democrats had not moved to filibuster the legislation, Senate Democrats have introduced new legislation known as the Preserve Rights of States and Political Subdivisions to Encourage Retirement Savings (PROSPERS) Act, as reported by NAPA.

According to a report filed by Nevin Adams at NAPA:

On May 3 the Senate passed H.J. Res. 66 by a vote of 50-49, echoing action taken by the House of Representatives in February. If President Trump signs the legislation, it would cancel the safe harbor promulgated by President Obama’s Labor Department last year. The action was taken under the Congressional Review Act, which allows Congress to consider and pass legislation to overturn certain significant regulation if that legislation is ultimately signed by the president. In April, President Trump signed legislation that blocks the Obama-era DOL’s safe harbor exempting states’ and municipalities’ auto-IRA programs from ERISA.

The latest move will not halt the auto-IRA plans in the five states that have already passed legislation, requiring companies of a certain size to offer a payroll deducted retirement plan. The Obama administration directed the DOL to grant these state multiple employer plans (MEPs) exemption from ERISA to encourage participation.

Connecticut, as well as California, Illinois, Maryland and Oregon, have said they say they intend to push forward with programs to provide retirement plans for private-sector workers despite congressional efforts to block them, according to the NAPA report.

Critics within the retirement industry argue that the DOL exemption would give states a competitive advantage over private plans. Also, surprisingly, employers who responded to a Pew Charitable trust poll had objections as well.  Many of the businesses surveyed would prefer privately-run plans versus state-administered plans as well.

state run auto-IRA plans

Source Pew Charitable Trust

Timothy Kelly
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