March 30, 2017 02:20 PM UTC

Bennet Bites Back Over "Auto IRA" Plans

• 5 Comments
• by: Colorado Pols

A behind-the-scenes battles in Washington that could have impacts on upcoming legislative debates in Colorado–not to mention existing policy in several other states–flared up today. The U.S. Senate voted to overturn an Obama-era easing of regulations to allow local governments to set up retirement savings plans for workers that don’t otherwise have coverage. Politico wrote about this under-reported fight this week:

As soon as this week, the Senate is poised to overturn two Department of Labor rules that concern retirement savings. But instead of tying firms in red tape, the rules actually reduce the burden of regulations on states and businesses trying to help people save for retirement. So repealing them would put the obstructive regulations right back in place.

The disagreement stems from laws passed in five states—California, Connecticut, Illinois, Maryland and Oregon—that require employers without 401(k)-style retirement plans to automatically enroll their workers in state-run retirement accounts. The idea is to create a new, automatic retirement-saving option for themillions of workers who don’t have access to any kind of retirement plan that deducts from their paycheck. (Though auto-enrolled, workers could opt out.)

Those laws might not seem like they’d involve the federal government at all, except that a 1974 law, the Employment Retirement Income Security Act (ERISA), ties employers up in a number of rules if they establish or maintain a worker’s retirement account. ERISA is intended to protect workers, but it also makes retirement plans more costly to run, and is a big part of why many smaller employers don’t offer 401(k) plans. When the five states passed the new savings law, firms started to worry they’d be held liable to ERISA standards, making the new laws just as expensive as running their own 401(k)s, even though they only function as middlemen.

So last fall, the Department of Labor issued two rules—one for states and one for municipalities—providing a “safe harbor” so that auto-IRA plans will not fall under burdensome ERISA requirements. These “safe harbor” rules are the ones the GOP wants to roll back.

Today, the Senate voted to re-impose the old rules on local governments who operate these kinds of savings plans–and Sen. Michael Bennet of Colorado took to social media to condemn the move:

Senate just voted to block local-level auto-IRA rule. Congress should do more to help Americans save for retirement, not less. 1/3 https://t.co/NrWhtpjtO4

— Michael F. Bennet (@SenBennetCO) March 30, 2017

Here’s my question: Why is the GOP for state- & locally-driven efforts, except when they help working families? 2/3

— Michael F. Bennet (@SenBennetCO) March 30, 2017

Blocking auto-IRAs is not the answer. There’s still a chance to protect the state-led efforts. Let’s hope we do. 3/3

— Michael F. Bennet (@SenBennetCO) March 30, 2017

Colorado’s other U.S. Senator Cory Gardner voted the other way–but there’s reportedly some hope he might be brought around to support state-based retirement plans on a separate but related measure the Senate hasn’t yet voted on. This could all become first-person relevant to Colorado with legislation introduced in the state legislature, House Bill 17-1290, which would create a Colorado Secure Savings Plan. It’s our understanding that the bill does have a provision for dealing with changes from Washington, but obviously it wouldn’t be desirable.

These locally-administered “auto IRA” programs have support from progressive economics and fiscal policy groups, since they give workers without other long-term retirement savings options a low-overhead way to participate–which pays major dividends later in life both for workers and governments who would otherwise pay to support them in retirement. Bennet is on the right side with his Democratic base here, and we’ll be watching to see if he can peel Sen. Gardner off before the next vote.

Wouldn’t that be a refreshing change?