The Department of Labor last year implemented regulations
permitting state and local governments to create mandatory retirement savings plans for private-sector employees and exempting those plans from investor protections required under the federal ERISA law.
Congress is now considering a pair of measures under the Congressional Review Act that would negate the DOL rules. NAIFA has sent letters to the leadership in the House
and the Senate
urging Congress to invalidate the DOL regulations.
NAIFA strongly supports
efforts to promote retirement security for all American workers and has encouraged innovative improvements to our voluntary retirement system. However, it should not be the role of state and local governments to compete with existing, successful private-sector companies. Numerous private-sector firms offer retirement plans currently available to employees, including those who lack access to employer-sponsored plans. These include traditional and Roth IRAs.
It is particularly unfair (and potentially dangerous to consumers) that under the DOL rules these state and local plans are not subject to the same federal regulatory protections as private-sector plans.
Private-market plans have many advantages over state-run plans, not the least of which are the investor protections provided under ERISA. Workers who participate in employer-sponsored plans often benefit from employer matching contributions, auto enrollment policies, and auto escalation provisions. NAIFA believes that the government’s resources would be better used to encourage employee-sponsored plans than to set up plans to compete with the private market.
State-run plans are also problematic in that they often place burdensome and contradictory mandates on employers. The DOL has acknowledged that a patchwork of municipal- and state-run retirement plans could require companies to contend with more than 100 jurisdictions with overlapping and conflicting mandates.
NAIFA’s primary concern is that state-run plans will ultimately result in fewer plans, limiting the choices available to employers and employees. More robust private sector plans having to compete with state-run plans on an unequal regulatory footing could fall by the wayside. This would not benefit employees or employers, particularly small businesses.
NAIFA believes that the federal and state governments should use their limited resources to encourage workers to save for retirement, but should not compete with the private sector when it comes to setting up and administering those plans.