Congressional resolutions that unraveled safe harbors for states and cities to create retirement programs for private-sector employees accomplished two things: They stiffened those states' resolve to push ahead, and they dramatized the urgency of finding a way to help what AARP estimates to be as many as 55 million workers who lack access to a retirement plan.
“It just seems very hypocritical,” said Illinois Treasurer Michael Frerichs, whose state is working to launch its auto-enrollment, payroll-deducted retirement savings account program by the end of the year. “We intend to move forward.”
A handful of states — California, Connecticut, Illinois, Maryland and Oregon — are developing retirement savings programs for private-sector employers that do not already offer such plans, and another 20 states passed legislation this year to study options or take the next steps, according to the Center for Retirement Initiatives at Georgetown University in Washington.
States eager to get ahead of what they see as a looming retirement crisis were cheered when the Department of Labor last August issued safe harbors for states and later, in December, for large political subdivisions. Worried about pre-emption by federal regulators, states were relieved that such “secure choice” programs would not be covered by the Employee Retirement Income Security Act, which would have made employers, especially the smaller ones targeted by the initiatives, more resistant.
Congress' message for states to stop those efforts came in the form of resolutions — narrowly approved along party lines by the Senate in May and the House in February — rescinding those safe harbors, and followed by a similar resolution for cities and other large political subdivisions already signed by President Donald Trump. Mr. Trump is expected to sign the state version soon.
Opponents of the safe harbors said they fear that giving states freedom to set up programs would impose conflicting and burdensome mandates on private-sector businesses of all sizes and eliminate long-standing federal retirement protections for workers provided under ERISA.