The Senate voted Wednesday to kill Obama-era rules promoting the creation of certain retirement plans, called auto-IRAs, by states. The bill now heads to the desk of President Donald J. Trump, who is expected to sign it into law.
The Senate voted 50-49 in favor of H.J. Res. 66, the joint resolution overturning the Obama-era Department of Labor regulation.
The vote was along party lines, with Republicans voting to overturn it. The bill wasn't subject to a Democratic filibuster.
"President Obama's Department of Labor issued regulations that would impose new burdens on employers and employees when it comes to saving for retirement," Senate Majority Leader Mitch McConnell, R-Ky., said on the Senate floor.
The DOL promulgated its rule, Savings Arrangements Established by States for Non-Governmental Employees, in August last year. It encouraged states to establish automatic-enrollment, payroll-deduction individual retirement accounts, known as auto-IRAs, for private-sector workers not covered by a workplace retirement plan.
"Fifty-five million working Americans do not have a way to save for retirement through their employer — that's nearly half of all private-sector workers aged 18 to 64. So it's a huge concern," said Senate Minority Leader Chuck Schumer, D-N.Y. "So what did the Obama administration do in its last few months? Wisely, they said states could set up initiatives for employees to save through their employers' payroll systems."
The House of Representatives voted in mid-February to kill the Obama-era rule. It also passed a resolution against a similar rule encouraging cities and other municipalities to set up auto-IRA programs.
The Senate passed the bill against city plans in late March, and the president signed it into law in mid-April. The president's advisers signaled Mr. Trump also would agree to scuttle the state auto-IRA rule if it made its way to his desk.
Five states — California, Connecticut, Illinois, Maryland and Oregon — have passed legislation within the past few years to create such retirement programs for the private sector. Such plans mandate that private-sector employers of a certain size automatically enroll employees into a workplace plan, which could be an auto-IRA or other plan such as a 401(k). Employees could opt out.
If Mr. Trump signs the pending resolution, it would likely slow or halt development of auto-IRA programs by other states, at least a half dozen of which introduced auto-IRA legislation 2016 alone.
It would be the 14th time Mr. Trump has used the Congressional Review Act to overturn regulations issued toward the end of Mr. Obama's administration. It had only been used once before, by President George W. Bush, in the law's 21-year history.
"I don't think it will have much impact on the states that are in the process of developing programs, but I do think it will have a chilling effect on other states" if Mr. Trump signs the resolution, said Brian Graff, executive director of the National Association of Plan Advisors. "I think it would make a lot of states re-evaluate."
The DOL's regulation effectively provides a safe harbor, exempting the auto-IRA programs from federal retirement law, the Employee Retirement Income Security Act of 1974, if certain provisions are met, which helps reduce liability risk for states.