President Donald J. Trump on Wednesday evening signed a joint resolution killing an Obama-era regulation that encouraged states to set up retirement plans known as auto-IRAs.
The Department of Labor had issued the regulation in question in August under former President Barack Obama. The regulation created a safe harbor under which states could establish automatic-enrollment, payroll-deduction individual retirement accounts for private-sector workers who don't have access to a retirement plan through their employer.
Five states — California, Connecticut, Illinois, Maryland and Oregon — have passed legislation to create such auto-IRA programs, which mandate that employers of a certain size offer a workplace plan, which can be either a private-sector option like a 401(k) or the state auto-IRA option. Employees can opt out.
These states have vowed to forge ahead with their plans, which primarily affect smaller employers, despite Mr. Trump's signing the bill to overturn the DOL regulation. Oregon, the state furthest along in implementation, plans to open its program for enrollment this year.
While the reversal of the DOL rule doesn't rule out the creation of auto-IRA programs by states, it makes their path forward a little more uncertain. Observers expect Mr. Trump's action to have a chilling effect on the plans being developed by other states.
Around 20 states have either proposed legislation or to study program options this year, according to Georgetown University's Center for Retirement Initiatives.
Significantly, because the auto-IRA rule was overturned using a mechanism called the Congressional Review Act, the executive branch can't craft a "substantially similar" replacement rule in the future.
In April, Mr. Trump signed a similar resolution killing a rule that facilitated auto-IRA programs established by cities and other municipalities.