Senate votes to kill city auto-IRA rules

The Obama-era regulations will likely be scrapped by President Trump, whose administration has already taken a stance against them

Mar 30, 2017 @ 1:02 pm

By Greg Iacurci

The Senate voted Thursday to kill Obama-era retirement rules meant to promote the creation of so-called auto-IRAs for municipalities such as cities and counties.

The chamber voted 50-49 in favor of a resolution of disapproval, H.J. Res 67, to overturn a regulation issued in December by the Department of Labor governing automatic-enrollment IRA programs established by municipalities.

The resolution, introduced in the Senate earlier this month, wasn't subject to a filibuster from Democrats.

The DOL rules encourage cities to create programs to close the gap in workplace retirement plan coverage, especially among small businesses, by exempting the auto-IRAs from federal retirement law — the Employee Retirement Income Security Act of 1974 — if the programs meet certain conditions. That's meant to ease liability concerns for cities.

The House earlier voted in favor of the resolution, setting the stage for President Donald J. Trump to sign the bill into law.

The Senate vote hints at a similar outcome for rules governing state-created auto-IRA programs, although it's not clear when a vote on the state resolution (H.R. Res 66) will happen. The Trump administration issued a statement Mar. 13 saying that if the resolutions made their way to the president's desk, his advisers would recommend signing them.

That position, however, runs counter to one expressed by an adviser to Mr. Trump when he was campaigning for the presidency.

"Trump believes any states who want to set up their own auto-IRAs have every right to do so and he doesn't want to interfere with their initiatives," Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, said in October.

(More: Faltering congressional support for auto-IRAs leaves legislation up to states)

Five states — California, Connecticut, Illinois, Maryland and Oregon — have passed laws to set up these plans for private-sector workers. One of the central components of these programs is a mandate for employers of a certain size to offer a workplace retirement plan, either a private-sector option such as a 401(k) or the auto-IRA.

Scrapping the Obama-era rules would likely stall efforts under way among states and cities to create such programs. Cities such as New York, Philadelphia and Seattle have expressed interest in creating auto-IRA programs, as have several other states.

"These regulations encourage state and municipal governments to impose conflicting and burdensome mandates on private-sector businesses and to bar private workers' access to their retirement accounts," said Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee. "Places like New York City shouldn't just get a pass on investing potentially billions of dollars in private worker retirement assets without regard to federal rules requiring prudent investment practices — rules designed to protect retirement nest eggs of hard-working Americans."

However, Sen. Ron Wyden, D-Ore., ranking member of the committee, disagreed.

"It's automatic and painless for workers so that more people will start saving. It's cost-effective and straightforward for employers, eliminating a lot of red tape and administrative hassle," he said. "The Trump administration says it wants to cut red tape that burdens business. This legislation will do the opposite, making it harder for small businesses to provide retirement savings programs for their workers."

If Mr. Trump signs the resolution into law, the DOL would be prevented from issuing similar rules in the future, unless Congress authorized the agency to do so, said Will Hansen, senior vice president of retirement and compensation policy at The ERISA Industry Committee, an association for large employers.

0
Comments

What do you think?

View comments

Upcoming event

Nov 20

Conference

Future of Financial Advice

An innovative conference dedicated to improving the client experience by enhancing digital technology, mainstreaming healthcare and optimizing wealth management strategies.The Future of Financial Advice will provide a forum for... Learn more

Most watched

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

Latest news & opinion

SEC clears up confusion over whether advisers can continue to call themselves fiduciaries

Despite an agency directive to eliminate the word 'fiduciary' in Form CRS, SEC officials say it's OK to use it.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession.

How to suspend Social Security benefits

Mary Beth Franklin says the move can boost future benefits but advisers and their clients should beware of unintended consequences.

Vermont establishes restitution fund for victims of investment fraud

Portion of settlements with financial perpetrators would supply the pool.

10 IBDs with the most variable annuity revenue

Although the popularity of VAs has declined in recent years, some independent broker-dealers still do a good business in them.

X

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 investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

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

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print