House votes to kill DOL's state, city auto-IRA rules

Some observers believe halting the rules wouldn't stop states from moving forward with auto-IRAs on the books, but would likely halt progress on proposed bills.

Feb 15, 2017 @ 5:00 pm

By Greg Iacurci

+ Zoom

The House on Wednesday voted in favor of two resolutions to overturn Labor Department rules issued last year that promote creation of auto-IRA programs by cities and states.

The resolutions to kill the Obama-era rules were introduced last week, on Feb. 8.

One, sponsored by Rep. Tim Walberg, R-Mich., pertains to rules governing state retirement programs; the other, sponsored by Rep. Francis Rooney, R-Fla., pertains to municipalities such as cities and counties.

The House voted 231-193 in favor of the state resolution, and 234-191 in favor of the one governing cities, with both contests largely along party lines.

The DOL regulations encourage states and municipalities to create automatic-enrollment, payroll-deduction IRA programs for private-sector workers by exempting such programs from federal retirement law, the Employee Retirement Income Security Act of 1974, thereby limiting their liability.

Killing the rules would be an attempt to stymie creation of auto-IRA programs, which five states have been developing.

The programs seek to close the retirement-plan coverage gap and boost savings by mandating employers offer a plan to their workers. The auto-IRA would serve as an alternative retirement plan for employers that didn't want to offer a private-sector option such as a 401(k).

The programs have drawn criticism from some groups such as the Financial Services Institute Inc., the Investment Company Institute and the Chamber of Commerce, which say they will create a patchwork of different retirement plans across the country and expose investors to fewer protections.

The resolutions wouldn't be subject to a filibuster in the Senate. Observers say, though, that Senate action on the resolutions is unlikely to be as swift as in the House due to more pressing proceedings in the Senate such as nomination hearings.

Congress has a limited time frame, up until roughly mid-May or mid-June, within which it can pass a resolution overturning the DOL rules governing the state and city rules. The Department of Labor put the rules on the books in August and December last year, respectively.

Observers believe there'd still be a legal basis for states to move forward with their programs even if the rules were killed, but states that haven't yet passed bills to create such programs may adopt a wait-and-see attitude.

0
Comments

What do you think?

View comments

Recommended for you

Latest news & opinion

Advisers go on the offensive, getting clients ready for the next market correction

Some proactive planners are spelling out for clients the impact of a 10% or 20% correction.

Phyllis Borzi says opponents of DOL fiduciary rule face uphill climb to further delay or dilute it

Former assistant Labor secretary who crafted the rule says President Trump won't be able to get rid of it simply because he doesn't like it.

Shrinking talent pool puts strain on advisory firms

Attrition, cuts in training programs and new competition make it difficult to fill job openings

Trump miscues, more cash becoming available will drive summer muni bond rally

As Trump agenda derails, municipal bonds are benefitting from flight to safety as well as a mismatch between bonds maturing and new issues.

Indexed, variable annuity sales slump as DOL fiduciary rule looms

Uncertainty around the rule may be contributing to tentativeness from advisers and distributors.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print