Rules allowing cities and other large political subdivisions to set up private-sector retirement savings programs were reversed Thursday when President Donald Trump signed legislation disapproving them.
Similar legislation disapproving safe harbors for states was passed by the House of Representatives but has not been scheduled for Senate action. The safe harbors addressed concerns that such programs would be pre-empted by the Employee Retirement Income Security Act.
The Department of Labor issued final rules last August for states and in December for cities and other large political subdivisions that granted a safe harbor for them to set up payroll deduction individual retirement accounts for private-sector workers who do not have access to workplace retirement savings programs.
Supporters of the legislation warn that the DOL guidance could remove important protections for retirement savers and affect portability and multistate employers.
Proponents of secure choice initiatives say they will press on. "It is disheartening that this action was taken, but our office is still reviewing employer-based plans that would give those without a workplace retirement option the opportunity to build a secure financial future," said Philadelphia City Controller Alan Butkovitz in an emailed statement.
States are continuing to implement programs and work on legislation creating them, Hank Kim, executive director and counsel of the National Conference on Public Employee Retirement Systems, said in an interview. “We are disappointed that the president signed this wrong-headed congressional action, but we will continue to fight for retirement security at the state and local level.”
The initiatives being considered in many states and municipalities “would take a strong step in addressing our nation’s retirement crisis,” said Yvonne Walker, president of Service Employees International Union Local 1000. “Instead, lawmakers chose to let us down by continuing to rig the system against everyday people in favor of large financial institutions and insurance companies.”
