Complying with a directive from the White House, the Department of Labor on Monday released a proposed rule and interpretive bulletin to help guide states in developing state-run retirement plans that don't run afoul of ERISA.
Noting the nearly 70 million workers without access to retirement plans at work, Labor Secretary Thomas Perez said in releasing the plan that employees' inability to save through work is not only a "potential financial crisis for these individuals and their families, but a critical economic issue for the nation."
Monday's guidance, Perez said, "is another plank in the economic security platform that President Obama and this administration have been building to help create new savings options, ensure workers are getting sound retirement advice, and bolster bedrock programs such as Social Security."
DOL filed Sept. 3 with the Office of Management and Budget its proposed rule designed to make it easier for states to offer their own retirement plans without running afoul of the Employee Retirement Income Security Act.
During the White House's Conference on Aging, held in July, President Barack Obama directed Perez to publish a proposed rule to "provide a clear path forward for the states to create retirement savings programs" by year-end.
Specific to the proposal is a new safe harbor from ERISA for state-sponsored IRAs that conform to certain provisions. The proposal would adopt a standard stating that state-sponsored payroll deduction IRA programs must be "voluntary" for workers, rather than "completely voluntary" as defined in a 1975 rule.
"This will allow for automatic enrollment of employees in such programs so long as they are given the ability to opt out, and employers are minimally involved," DOL states.
For instance, "employers would make the automatic deductions from employee paychecks, but the employees and states would retain control of the program and IRA accounts," DOL says. "Employers could not prevent workers from declining to participate in the program."
Comments on the proposed rule are due by Jan. 19.
DOL also published an interpretive bulletin regard creating state-based ERISA-compliant 401(k) plans that are open to businesses and workers. In addition to payroll deduction IRAs and state-based 401(k)s, the bulletin provides examples of how to create state retirement savings programs that may avoid being preempted under ERISA.
Illinois Treasurer Michael Frerichs said that nearly 1.2 million workers are poised to benefit from Illinois' state-run plan, the Secure Choice Retirement Savings Program. "With these new federal rules, my administration can move forward with helping some of our state's most vulnerable workers," Frerichs said.
