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.
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.