DOL Proposal Gives “Green Light” to States Looking to Set Up Retirement Savings Initiatives

Many states – Illinois, California, Oregon and others – operate retirement savings programs for private workers.

Similar systems are in the works in dozens of other states.

Now, a Department of Labor rule proposal, released Tuesday, could increase the number of states who eventually choose to create and administer retirement savings programs for private workers.

More on the rule from Bloomberg:

Labor Secretary Thomas E. Perez announced Nov. 16 that his agency had issued a proposed rule establishing a new safe harbor from the Employee Retirement Income Security Act for state-sponsored programs involving automatic payroll deductions for workers to individual retirement accounts. Illinois, California and Oregon have all taken steps to establish such programs.

Perez said the department had also published an interpretive bulletin clarifying that states are authorized to sponsor and administer ERISA-compliant 401(k) plans for a wide range of businesses. The interpretive rule specifies that the state, and not the employer, would function as fiduciary in such retirement saving programs.

Speaking to reporters in Chicago, Perez called states “great laboratories of public policy innovation.” He said that more than two dozen states are currently considering legislation permitting them to establish savings programs aimed at the 68 million American workers without access to an employer-sponsored retirement plan. At the same time, Perez said concerns over potential federal intervention had caused most states to hesitate.

“For too long, states have held back from designing and implementing good ideas in this space because of the specter of ERISA preemption,” Perez said. “Our goal today is to eliminate that deterrent and to unleash the innovation and creativity that exists in this state and in so many states. States belong in the policy-making vanguard, especially on an issue as important as retirement security.”

Read the rule here.

Photo by Tom Woodward via Flickr CC License