DOL issues final rule on city retirement programs

The regulation is similar to one issued in August around state retirement programs

Dec 19, 2016 @ 2:46 pm

By Greg Iacurci

The Department of Labor today issued final rules governing retirement programs established by large cities and counties, in the most recent effort by the Obama administration to help plug the retirement coverage gap.

The regulation, which will be published Dec. 20 in the Federal Register, is meant to entice municipalities such as cities and counties to set up payroll-deduction individual retirement account programs for workers in the private sector who don't already have access to a retirement plan through their employer.

The rule, which will be effective 30 days after publication, is similar to one covering state retirement savings programs that the Labor Department finalized in August.

“Increasing access to savings opportunities, improving transparency and reducing conflicts of interest in investment advice are all critically important policy tools that this administration has pursued,” assistant secretary of labor Phyllis Borzi said in a statement. “We hope that today's rule increasing access to savings opportunities will add to the tools available for working people who want to save for retirement.”

Like the one governing state programs, the most recent rule eases liability risk for municipalities by exempting them from being subject to the Employee Retirement Income Security Act of 1974 if their plans adhere to certain guidelines.

“It's a safe harbor that's very similar to the one released for states, but it allows large political subdivisions like cities and counties also to mandate an auto-IRA program for employers in that city or county,” Michael Hadley, partner at Davis & Harman, said.

To be able to set up a qualifying program, a city or county would have to have a population that is equal to or greater than that of the least populous U.S. state. (So, currently, a municipality would need a population greater than that of Wyoming).

Five states — California, Illinois, Oregon, Connecticut and Maryland — have passed legislation to set up automatic-enrollment payroll-deduction IRA programs. They're mandatory for employers of a certain size to offer to employees if they don't already offer a workplace retirement plan. (Employees are able to opt out.)

Other states such as New Jersey and Washington have taken a different approach through a voluntary, marketplace program.

Cities such as New York City and Seattle have indicated they're moving ahead with their own measures.

Opponents of such savings programs say they will create a patchwork of different plans across the U.S. and lead to less investor protection.

To establish an auto-IRA program, a city or county must have already established a retirement plan (pension or defined contribution) for city or county employees, to ensure the municipality is sophisticated enough to implement the program, Mr. Hadley said.


What do you think?

View comments

Recommended for you

Featured video


Regional brokerages are picking up assets, advisers from wirehouses

Senior columnist Bruce Kelly discusses with deputy editor Bob Hordt the impact of big brokerage houses pulling back on recruiting and regionals promising recruits less bureaucracy.

Latest news & opinion

Regional broker-dealers quietly making comeback now, but the future remains uncertain

After a period of decline, the regional brokerage industry is scoring recruiting gains at the expense of wirehouses.

With stock market in a correction, is a recession just ahead?

Some say the market is overreacting to bad news — but what if it's not?

10 tips for hiring top young advisers

Hiring is not easy and retaining good employees can be even more difficult. Here's a roadmap for bringing on new advisers and training them — and even firing them, if necessary.

Kestra Financial latest broker-dealer to be put up for sale

The independent B-D's owner, Stone Point Capital, has tapped Goldman Sachs to lead the deal.

Wells Fargo Advisors 2019 comp plan sees little change

But lowest-producing advisers face a pinch in pay.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print