US Senate Acts on State Mandates

In May 3, 2017, the United States Senate voted 50-49 to move forward a resolution of disapproval under the Congressional Review Act of 1996 to nullify the Obama administration era Department of Labor (DOL) regulation that created a safe harbor for state-based IRA programs requiring mandatory participation.  Once this resolution (House Joint Resolution 66) is signed into law by President Trump, the safe harbor for state mandatory IRA programs enacted late in the Obama administration will be eliminated.

As we reported on April 7, 2017, Congress had previously approved a similar resolution (House Joint Resolution 67 (H. J. Res. 67)) that eliminated the Obama administration safe harbor for municipalities.
PSCA Board Chairman Ken Raskin confirmed that: "Under those two DOL regulations, state IRA mandates would not have been required to comply with the fiduciary oversight and other protections of ERISA that would apply to comparable employer-sponsored initiatives.  The rules would have allowed states and cities to adopt overlapping and inconsistent requirements for employers operating in multiple states - effectively disregarding ERISA's statutory preemption of state laws affecting employee benefit plans.  Similarly, the state legislation may have applied unique requirements to workers who had not yet completed eligibility requirements to participate in their employer-sponsored plan."

Seven states had previously enacted mandates (California, Connecticut, Illinois, Maryland, New Jersey, Oregon, and Washington),  however, requirements affecting employers have not yet been implemented.  Many other states and cities are considering comparable legislation/ordinances - some differ significantly with regard to employer mandates/requirements.

Of course, none of this affects a worker's ability to save in an IRA.  Since 1982, all workers earning wage income have been eligible to contribute to an IRA of their choice - whether or not they are eligible for, or participate in, an employer-sponsored retirement plan.  Similarly, this does not impact an employer's ability to voluntarily offer payroll-deduction support for IRAs alongside their employer-sponsored savings plan or to voluntarily incorporate "Deemed IRA" provisions in their retirement savings plan.

PSCA agrees with the actions taken by Congress that reaffirm our voluntary employee benefit system.  PSCA continues to encourage individual workers and employers to evaluate whether and how IRAs should be incorporated in their retirement planning and preparation.