DOL expects to issue final rule on city retirement programs by year end

Following on a rule issued over the summer concerning state plans, the DOL is forging ahead with one governing city-based programs

Oct 26, 2016 @ 12:30 pm

By Greg Iacurci

+ Zoom

The Labor Department expects to issue a final rule governing city retirement programs by the end of the year, according to Phyllis Borzi, assistant secretary of labor at the department's Employee Benefits Security Administration.

The rule would follow on one the Labor Department promulgated in August concerning state programs. That regulation eased liability risk for states establishing workplace retirement savings programs by clarifying such plans wouldn't be subject to the federal Employee Retirement Income Security Act of 1974 if they met certain conditions.

Upon issuing of the final state rule, the Department of Labor also issued a notice of proposed rulemaking seeking comments on whether and how the safe harbor should be expanded to “state political subdivisions.”

“I think you can expect us to finalize some sort of a regulation by the end of the year,” Ms. Borzi said Tuesday at the 2016 American Society of Pension Professionals and Actuaries annual conference in National Harbor, Md.

Absent action at the federal level to close the retirement coverage gap, some cities and states have stepped in to help.

NEW YORK, SEATTLE

Illinois, California, Maryland, Connecticut and Oregon have passed legislation to set up automatic-enrollment IRA programs, primarily for the benefit of employees of small businesses that don't offer a workplace savings plan. Two others — Washington and New Jersey — passed measures to set up retirement marketplaces. Around 20 other states are considering their own bills.

However, cities such as New York and Seattle are also moving forward with their own measures, Ms. Borzi said.

She believes a city regulation similar to that of the one governing states would be on solid legal footing.

“From a legal point of view, the rationale that allowed us to move forward on the state initiatives doesn't really change if you're talking about a political subdivision, because the distinction between what's a plan under ERISA and what's not doesn't really turn on the nature of the state entity that's offering it,” she said.

In the rule proposal, the DOL said one condition for cities establishing a program is that its state can't have already done so. That would implicate Seattle, because Washington is setting up a marketplace.

“We're just trying to figure out how to wrestle with those issues,” Ms. Borzi said.

PROLIFERATION?

Some in the industry feel a downside to state and city plans is the creation of a patchwork of different plans across the country.

Having several sets of rules “is not the most efficient way to run a railroad,” Brian Graff, chief executive of the American Retirement Association, said Tuesday.

He, along with Ms. Borzi and Mark Iwry, senior adviser and deputy assistant secretary at the Treasury Department, expressed their advocacy for a federal program.

Aside from the benefit of a unified, nationwide program, investors would benefit through stronger consumer protections in a federal plan, according to Ms. Borzi and Mr. Iwry.

“We share the concern that you don't want a proliferation of these programs,” Ms. Borzi said. “On the other hand, unless and until Congress is willing to move forward, we have a serious coverage problem.”

Separately, Ms. Borzi said the DOL won't be able to complete a regulatory project concerning lifetime income illustrations on participant account statements by the end of the Obama presidency.

“One of my biggest regrets is the project we had going for my whole tenure on lifetime income, I won't be able to bring to fruition,” she said. “We've just run out of time.”

However, Ms. Borzi expects the next administration to take up the project because it's a bipartisan issue that's received interest on Capitol Hill, she said.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30

Conference

Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video

Events

What to do when your partnership ends

Breaking up is hard to do: and that is certainly true when it comes to advisory firms. Financial Adviser Rob Holdford tells his story and explains how you can survive and thrive when a partnership dissolves.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

10 signs your client is cheating on you

Sure signs that clients may be on the way out the door.

How adviser salaries stack up to other jobs

Median compensation hovers just under $100,000 on the low end and reaches nearly $300,000 for bosses.

How to save retirement planning from tax reform

Losing big deductions, even in lieu of a larger standard deduction, may cause taxes to rise in retirement.

Advice firms in a tricky financial position

As revenue growth dips and salaries rise, nearly 90% of firms are at or near capacity.

In a turnaround, Wells Fargo Advisors sees slight bump in headcount

Racked by a scandal in its retail banking unit, Wells still managed to add 37 new advisers in the third quarter, a small number but an improvement nonetheless.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print