Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. REGULATION AND LEGISLATION
February 20, 2017 12:00 AM

Secure Choice prospects tested by House vote

Some not giving up on private-sector program

Hazel Bradford
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    AP Photo/Mel Evans
    Joe Torsella said there are still some options available.

    States and local governments hit a major roadblock Feb. 15, when the U.S. House of Representatives approved resolutions blocking Department of Labor safe-harbor rules for their private-sector retirement savings programs.

    The move might chill those efforts for some, but others vow to persevere.

    “We will regroup,” said Joe Torsella, Pennsylvania's new state treasurer who campaigned on creating an automatic IRA program for private-sector employees without retirement plan access. Mr. Torsella expects last year's bipartisan legislation to reappear in the current legislative session. ”While there are (fewer) options open to us, it's not that there are no options.”

    More than 30 states have considered “Secure Choice” state legislation to create programs for private-sector employees without access to an employer-sponsored retirement plan, and eight have programs in development. Washington and Oregon's programs are expected to launch this year, followed by California, Connecticut, Illinois, Maryland and New Jersey. Massachusetts has a smaller pilot program for non-profits.

    Their caution about developing programs that could be pre-empted by regulators eased considerably when the Department of Labor issued the safe-harbor rules last year.

    Many states and municipalities plan to use individual retirement accounts controlled by participants, not employers, whose only role would be accommodating payroll deductions. Others are considering multiple-employer plans that would be covered by ERISA or retirement provider marketplaces that match small employers with existing service providers.

    Employers already sponsoring retirement plans are watching the drama closely as states design their programs, including how existing plan sponsors would be exempt.

    “The rules could hurt retirement savings and participants by discouraging plan sponsorship and limiting protections for workers,” Lynn Dudley, American Benefits Council senior vice president for global retirement and compensation policy, wrote to House Speaker Paul Ryan, R-Wis.

    “We want to make sure that no state goes down the path of harming the retirement system,” said Will Hansen, senior vice president of retirement policy for the ERISA Industry Committee, whose members worry about rules between states and conflicts with industry practices.

    That concern became real in Oregon, an early adopter set to launch a pilot auto-IRA in July. OregonSaves program officials are now reconsidering a proposal that would have required existing plan sponsors to enroll new hires within 90 days. “Our goal is to try to align the program with the way people already do business and with existing standards,” Oregon officials said in an email message welcoming public comments.

    How it was halted

    To stop the safe-harbor rules, the House used the Congressional Review Act, which allows Congress to prevent a federal agency from implementing recent rules or issuing substantially similar ones without congressional authorization. The rules came out Aug. 25 for states and Dec. 19 for cities and other large political subdivisions.

    Taking away the safe harbors “could deprive 6.8 million California private-sector workers the opportunity to save their own money for retirement through a workplace payroll contribution ... at no cost to taxpayers and minimal cost to employers,” said California Treasurer John Chiang in a statement. “Secure Choice, hailed as the greatest achievement in retirement security since the passage of Social Security in 1935, now faces great legal and economic uncertainty.”

    The action now shifts to the U.S. Senate, where proponents are pressing their case to be allowed to develop retirement savings programs at the local level in the face of federal inaction, and to protect their constitutional rights to take such actions. No Senate action has been scheduled.

    “Our hope is that they allow states to be laboratories of democracy,” said Illinois Treasurer Michael Frerichs, whose state is working to have its auto-enrollment, payroll-deducted retirement savings account program ready for enrollment by the end of the year. Mr. Frerichs, who manages $25 billion as the state's chief investment officer, is undeterred by the House action, which he cautions could cause bigger problems for small-business employers.

    “I specifically lobbied so employers would have protection from ERISA lawsuits because they are not making the decisions. We don't think employers should bear any legal burden. This is a conservative principle,” said Mr. Frerichs, one of 15 bipartisan state treasury officials who wrote letters to Congress, along with counterparts in New York City, Philadelphia and Seattle, to oppose the legislation.

    “If (the safe harbor) is repealed, it will have a chilling effect on states and cities considering these programs and it will make it harder for the current programs to be implemented,” said Angela M. Antonelli, executive director of the Center for Retirement Initiatives at Georgetown University in Washington. “With 10 states already proposing legislation in 2017, it would be unfortunate if Congress acts to slow such momentum,” Ms. Antonelli said.

    State legislatures now considering programs include Hawaii, Iowa, Nebraska, Utah and Virginia.

    “Policymakers across party lines have understood that this is about helping people save now so they can be more independent and less reliant on taxpayer-funded programs, such as Medicaid, in their retirement,” Ms. Antonelli added.

    A study by Segal Consulting estimates that if all states had private-sector programs they would save $5 billion in Medicaid spending over 10 years. A new National Institute on Retirement Security public opinion survey found growing bipartisan public support for state initiatives, up to 75% from 71% in 2015.

    Armed with data and their resolve to improve retirement outcomes locally, state and city officials are fighting back. “This is one skirmish in a much longer war (over) national and local policy on retirement,” said Philadelphia City Controller Alan Butkovitz. “The groups that are opposing (programs) see that this is going to become a larger and larger problem” as aging, unprepared populations grow, and demand on local governments increases, Mr. Butkovitz said.

    Plan service providers would have business opportunities in the new programs, Ms. Antonelli said. “States want to work with them to make it easier for them to serve these populations they are not reaching now, or have not found profitable to serve for 40 years.”

    Lisa Bleier, managing director for public policy with the Securities Industry and Financial Markets Association in Washington, is hopeful that states will see this is an opportunity to work more closely with the federal government on the Treasury Department's MyRA program, or consider the marketplace approach.

    “I think states are going to have to rethink how they do it. We definitely have concerns, and we will continue to raise those concerns,” Ms. Bleier said. “We do not think it is a market challenge. We see it as more of an education challenge.”

    Joshua Gotbaum, a guest scholar in economic studies at the Brookings Institution in Washington and chairman of Maryland's small-business retirement savings program, sees the DOL's safe harbor as a conservative interpretation of what ERISA permits, intended to reassure states. Removing the safe harbors “can't and won't change the law. States and cities can and should do what they are already doing. DOL always said that interpreting the law is the job of the courts,” he said.

    “The kinds of plans that are being developed are, to one degree or another, no-brainers,” said Mr. Torsella, the Pennsylvania treasurer. “I don't think any of us are going to give up on finding ways to help Americans save for their retirement, unless Congress has better ideas.”

    Related Articles
    Municipalities ready to join rush to private-sector plans
    States start hard work on private-sector savings efforts
    California seeks executive director for state's Secure Choice board
    Illinois picks consultant for Secure Choice Savings Program
    House resolutions introduced to undo state, city secure choice rules
    Oregon picks SSGA to provide investment options for new private-sector plan
    Resolutions introduced in Senate to undo 'Secure Choice' rules
    It's time for retirement specifics from President Trump
    DOL can't have it both ways
    Senate votes to block DOL rules on city 'secure choice' retirement programs
    Illinois launches search for Secure Choice program manager
    How to increase retirement savings of 60 million employees
    California Secure Choice seeks general consultant, names first executive direct…
    Congressional Democrats prod Treasury secretary to promote MyRA program
    Recommended for You
    Investors hail SEC guidelines on exchanges
    Investors hail SEC guidelines on exchanges
    Standards-of-conduct rules approved along party lines
    Standards-of-conduct rules approved along party lines
    SEC passes Reg BI package by 3-1 vote
    SEC passes Reg BI package by 3-1 vote
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing