The safe harbors allow states, and a select few municipalities, to mandate auto-enrollment in state-administered plans for businesses that don't already sponsor a retirement saving option for workers. Under the safe harbors, the plans would not be subject to the Employee Retirement Income Security Act, the federal statute that regulates private-sector retirement plans.

A resolution repealing the state safe harbor will be voted on separately in the Senate.

For weeks, the Senate has been expected to take up the resolutions on the safe harbors. Delays in the vote have led to speculation that Republicans may not have the votes to repeal the safe harbor for state plans.

A consortium of state treasurers, many of them from states controlled by Republican legislatures, have been lobbying Republican senators to support the safe harbor for state-administered plans.

The treasurers claim the safe harbor gives states flexibility to address retirement savings shortfalls and avert the potential fiscal crisis of poor retirees needing Medicaid and other state-funded public aid.

To date, the states that have passed an auto-IRA option, including California, Oregon, and Illinois, did so through Democratic governors. Maryland is the one exception—a Republican governor signed its state-administered retirement option into law.

Vote on muni safe harbor thickens the plot for state option

The Senate's repeal of the safe harbor may not necessarily portend the fate of the safe harbor for states.

Republicans will need 51 votes to repeal the controversial safe harbor for states, assuming all lawmakers vote and the Senate's Democrats and two independents vote against the resolution to repeal the state safe harbor.

Centrist Senate Republicans Susan Collins of Maine and Lisa Murkowski of Alaska have broken from their party on confirmation votes for President Trump's cabinet nominees.

Advocates for state-administered plans are holding out hope they will do the same on the repeal of the state safe harbor. Sen. Jeff Flake of Arizona has previously sponsored legislation that would provide a federally administered saving option, raising speculation as to his party loyalty on the safe harbor for states.

Getting three Republicans to defect may be more feasible after the vote to repeal the safe harbor for municipalities.

On the municipal vote, one Republican, Sen. Bob Corker of Tennessee, broke with his party and voted against repealing the municipal safe harbor.

That was unexpected. One conceivable explanation is that the conservative state treasurers who support the safe harbor for states influenced Corker, a fiscal conservative.

Industry opponents of the safe harbor argue state legislatures will be afforded too much latitude in crafting retirement plans, that the cost of administering the plans will far outstrip advocates' estimates, and that state-sponsored plans will lack portability for workers.

A particularly damaging, unintended consequence is that small business owners that do sponsor retirement plans will be incentivized to cut costs and move workers to state-administered options, argue opponents of the rule.

Moreover, opponents characterize the safe harbor as a regulatory loophole, because states would not be subject to the same fiduciary requirements that plan sponsors are under ERISA.

The Financial Services Roundtable, which advocates for the interests of financial services companies, applauded the vote on the municipal safe harbor, and urged "consideration" of the bill to repeal the state safe harbor.

"Policymakers should make it easier for more Americans to save for retirement without sacrificing needed consumer protections," said Jill Hoffman, FSR's vice president of government affairs for investment management, said in a statement.

"Whether you participate in a private sector retirement plan or one offered by a municipality, hardworking Americans deserve the same level of consumer protections to ensure their money is safe and will be there when they retire," added Hoffman.