The comment period has only just closed, but already critics are piling on with their disapproval of the Department of Labor’s proposed safe harbor for state-run retirement plans.
State-run plans, which provide a means of retirement saving for employees of mostly smaller companies who do not have access to an employer-sponsored retirement plan, have been gaining more attention as an increasing number of states jumps on the bandwagon.
But the plans are not universally popular, even—or perhaps especially—with the states that would administer them. While employers must withhold employee contributions and pass the money along to the state, those employers need not contribute to a plan, nor manage it in any way.
That’s the state’s job—and some states are worried about potential liability issues.
Hence the safe harbor proposal.
Voya Financial was first, saying that DOL contradicted itself with the safe harbor proposal, which is intended to limit the Employee Retirement Income Security Act’s (ERISA) scope on the small businesses that would participate. Such a limitation would butt heads with another DOL rule—the fiduciary rule, said Voya.
Now the Investment Company Institute has registered its disapproval, saying that the proposal for state-run plans overall, and accompanying guidance, “would spur a confusing, state-by-state patchwork of savings programs that could lack the strict federal protections mandated for private employers’ retirement plans.”
ICI took issue with exemptions from ERISA protections “for certain retirement savings programs” that could result in a “lack [of] critical protections … designed to prevent mismanagement and other abuses.” Instead, ICI said that DOL should determine on a case-by-case basis whether a state-run plan is suitable for an exemption.
Many states are hesitant to create such a plan without an ERISA safe harbor, lest they be held liable for plan outcomes.
Saying that the safe harbor provision would “create an unlevel playing field” and give state plans an unfair advantage, and that the agency “fail[ed] to consider [the] full scope of effects on workers,” ICI said that “state initiatives may not increase retirement plan participation and savings as effectively as is hoped.”
Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.
Your access to unlimited BenefitsPRO content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
