State-run private pensions

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http://www.governing.com/topics/fina...m_medium=email

As the Clock Ticks, Senate Stalls on State-Run Retirement Plans
Congress could overturn a rule that allows states to create private-sector retirement programs. But it only has a limited time to do it.







Late last month, Congress voted to overturn an Obama-era rule that cleared the way for cities to create retirement programs for private-sector workers that didn't have one through their employer. But a similar resolution targeting the rule as it applies to states is stuck.

For the past three weeks, that resolution has lingered in uncertainty as the Senate stalls on taking an up or down vote. Many believe that signals an opportunity.

"Based on the conversations we've had with staff and colleagues working on this," says Cristina Martin Firvida of AARP, which supports the Obama-era regulation, "I think there are a number of senators who still have a lot of questions about the state rule."

The rule, which was issued by the Department of Labor, reaffirmed cities' and states' legal right to help support private-sector savings programs for small businesses. Seven states are implementing such programs, while another dozen states and cities are considering them.


Called Secure Choice or Work-and-Save, the programs require most employers that don't currently offer a pre-tax retirement savings program to automatically enroll employees into one. They run independently from the state, employers don't contribute and employees can opt out at any time. The goal is to close what many feel is a retirement security gap among working Americans: Half of private-sector workers don't have an employer-sponsored retirement plan, and only a small percentage of those 57 million people have saved enough on their own to retire.

Studies have shown that these programs don't just help the individual but the states too. A recent analysis by Segal Consulting found that if all workers gain access to retirement plans, then states would save big on future Medicaid costs because vulnerable households would be removed from the poverty rolls by the time they retire. In the first 10 years after a retirement savings plan is introduced, 15 states would save more than $100 billion in Medicaid payments. California and New York alone would save more than $1.1 billion.

But in February, the House quickly passed two resolutions that overturned the Labor Department rule as it applied to cities and states. The Senate approved the resolution for cities a few weeks later, and it was signed by President Trump this month.

Even if the Senate overturns the state rule, it's unclear if it would impact those places that have already approved a Secure Choice program. Sarah Mysiewicz Gill, senior legislative representative for AARP, says most of these places approved their plans before the Labor Department clarified the rule last year. One such place, Oregon, is still moving ahead with its plans to launch a preliminary version in July.

Still, overturning the rule would open states to the possibility of lawsuits. The Labor Department rule exempted Secure Choice programs from the federal Employee Retirement Income Security Act, which governs private retirement plans and requires certain legal and financial protections for plan enrollees. In other words, someone could sue a state for allowing private-sector retirement programs that don't have the same fiduciary protections for enrollees that traditional, employer-sponsored plans have.

On top of that, many are worried that a rejection from Congress could have a chilling effect on the growth of such programs. That's already happened in Montana. A day after the U.S. Senate overturned the rule for cities, the state legislature reversed course and voted down a proposal to create a statewide Secure Choice program.

"There was a belief that the city rule impacted the state," says Gill.
.....

Unlike most things in Congress, this uncertainty for states does have a deadline. The resolutions are subject to the Congressional Review Act, so if the Senate does not follow the House and vote to reverse the rule by mid-May, it will stand.

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http://www.governing.com/topics/fina...m_medium=email

Did Congress Just Kill State-Run Retirement Programs?

The U.S. Senate on Thursday narrowly approved a resolution that overturns an Obama-era rule that cleared the way for states to create retirement programs for private-sector workers who don't have one through their employer.

Secure Choice or Work-and-Save programs were targeted by Wall Street firms and the U.S. Chamber of Commerce because the U.S. Department of Labor rule absolved state programs from providing workers the same legal protections that employer-sponsored 401(k) plans are required to have. “It would be patently unfair to give these government-run plans a competitive advantage by waiving regulatory restrictions,” said Paul Dougherty, president of the National Association of Insurance and Financial Advisors President Paul Dougherty, in a statement.

The Takeaway: So what happens now? It goes to President Trump, who has said he will sign it. But more important, many worry that these programs are now vulnerable to a legal challenge. Still, several states created and approved their programs before the Labor Department ruling last fall. For that reason, many believe these states have legal footing to move forward.

“After having consulted with legislative leaders and the Office of the Attorney General, I am convinced that while Congress has dealt Californians a setback, it is not enough to push us off of our moral and legal high ground,” California State Treasurer John Chiang said in a statement.

Along with California, Oregon State Treasurer Tobias Read has also vowed to push ahead, saying his state will still launch its pilot program on July 1. Washington state, which was slated to open its program later this year, has not said what it plans to do yet. The AARP says it is working with Oregon as well as California, Connecticut, Illinois and Maryland to help them continue with their programs.

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https://cv.actuary.org/members/alert...2017-PEB-6.pdf

PENSION ISSUES
Alert No. 2017-PEB-6
May 4, 2017
U.S. Senate Passes Joint Resolution to Repeal Rule on
State-Sponsored Retirement Accounts
The U.S. Senate yesterday passed by a vote of 50-49 a joint resolution, H.J. Res 66, which if enacted
would repeal a U.S. Department of Labor (DOL) final rule that provides states a safe harbor to facilitate
government-sponsored individual retirement accounts (IRAs) for private sector employees who do not
have access to workplace retirement savings programs. The rule was published in the Federal Register
on August 30, 2016. The Congressional Review Act permits Congress to pass disapproval resolutions to
block federal agencies from implementing new rules (within certain time periods).
On Feb. 15, the U.S. House of Representatives passed both H.J. Res 66 and H.J. Res 67, a measure to
repeal a DOL rule applicable to plans sponsored by municipalities. President Trump signed H.J. Res 67
into law on April 13 and is also expected to sign H.J. Res 66 into law. Seven states have adopted
retirement savings initiatives for workers without access to workplace retirement savings programs

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http://www.pionline.com/article/2017...15#cci_r=73393

States to persist with secure choice
Despite congressional action, plans still moving forward

Congressional resolutions that unraveled safe harbors for states and cities to create retirement programs for private-sector employees accomplished two things: They stiffened those states' resolve to push ahead, and they dramatized the urgency of finding a way to help what AARP estimates to be as many as 55 million workers who lack access to a retirement plan.

“It just seems very hypocritical,” said Illinois Treasurer Michael Frerichs, whose state is working to launch its auto-enrollment, payroll-deducted retirement savings account program by the end of the year. “We intend to move forward.”

A handful of states — California, Connecticut, Illinois, Maryland and Oregon — are developing retirement savings programs for private-sector employers that do not already offer such plans, and another 20 states passed legislation this year to study options or take the next steps, according to the Center for Retirement Initiatives at Georgetown University in Washington.
.....
“Congress has failed to address the national retirement security crisis in any meaningful way. States embraced their historic roots of being laboratories for social and economic advancement,” said California Treasurer John Chiang.

U.S. Sen. Chris Murphy, D-Conn., whose state is developing a program, chastised his colleagues about that before the Senate vote. “Think about the message you are sending to states. States are innovating to solve a problem that we are not solving. The consequences of what we are about to do are real.”

The battle was also seen as a reminder of how much money influences policy decisions in Washington, as financial services firms and their industry trade groups did a full-court press on Capitol Hill before the respective votes. Even a White House statement after the city resolution signing referenced the groups' concerns, noting secure choice programs “would give a competitive advantage to these public plans.”

Angela M. Antonelli, executive director of the Center for Retirement, sees something else. “The actions of Republicans to try and stop state initiatives that would create more competition, less Washington meddling, more retirement savings for private-sector workers and at no cost to the federal government are a reflection of Washington special interest politics at its worst.”

Secure choice advocates say their target audiences of non-savers is not being served in the marketplace now, and that it would take years to build the economies of scale needed for cost-efficiency and enough assets to attract interest from service providers. “If it slightly rubs the big retirement companies the wrong way, you're going to step in and take that ability away?” chastised Mr. Murphy on the Senate floor.

.....
Voluntary approach

Invoking ERISA protection provides an opening for proponents of multiple-employer plans with voluntary employer participation, an approach favored by Vermont, and included in a package of retirement incentives sponsored by Senate Finance Committee Chairman Orrin Hatch, R-Utah, who led the Senate vote against the safe harbors.

State officials might also rethink whether to make their programs voluntary or mandatory for employers. The mandatory auto-enrollment IRA programs enacted in five states to date were designed to remove employers from any fiduciary-related decisions and potential liability, but mandates also draw stronger opposition from business and financial services groups.

The question of ERISA protection is widely expected to be raised by opponents in legal challenges.

And current plan sponsors will be on alert for new program rules that could impose burdens on them, including how to be exempted, said Will Hansen, senior vice president for retirement policy with the ERISA Industry Committee in Washington, who contends that Oregon violated ERISA pre-emption principles. “We can educate other states as they develop their programs how infringing on employers who provide a retirement plan only harms the overall retirement system,” he said.

State officials who have already gone through legislative and legal scrutiny say they are ready.

“Oregon's program has been very carefully constructed and includes excellent saver protections,” OregonSaves Executive Director Lisa Massena posted on LinkedIn after the Senate vote. “We are staying the course.”

Officials in the other states at the forefront echo that resolve. “This changes very little,” said Hank Kim, executive director and counsel of the National Conference on Public Employee Retirement Systems. “We lost one tool in our toolbox that we didn't have before. States started down this path before this, and it will continue.”

And despite all the federal-vs.-states drama, there could be a silver lining, said Shai Akabas, director of fiscal policy for the Bipartisan Policy Center in Washington. “The fact they have now effectively opposed the state direction means that there is a hole for those who don't have access. I think that does put the onus on federal policymakers to offer a solution. There is a recognition that something needs to get done.”

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http://www.thinkadvisor.com/2017/05/...17&t=annuities

Trump Signs Resolution Abolishing State Run Auto-IRAs
H.J.Res 66 stops rule forcing private-sector workers into government-run retirement accounts, Rep. Walberg said

President Donald Trump signed H.J. Res 66 into law Thursday, invalidating the Department of Labor’s “safe harbor” regulations on savings arrangements established by states for non-governmental employees.

Rep. Tim Walberg, R-Mich., chairman of the Subcommittee on Health, Employment, Labor and Pensions, who authored the resolution, said after the president’s signing that “this resolution restores important retirement protections that workers have counted on for decades. Retirement security is a difficult challenge facing many Americans.”

The resolution, he continued, closes a regulatory loophole created by the Obama administration that would allow states to force private-sector workers into government-run retirement accounts without the consumer protections provided by the Employee Retirement Income Security Act.

Sen. Orrin Hatch, R-Utah, introduced companion legislation S.J. Res. 32. A similar resolution signed into law by President Donald Trump in April revoked city-run plans.

Last month, the CFA Institute said moves by politicians to end automatic enrollment of some workers in retirement savings plans are misguided.

The group shared its thoughts after the Senate followed the House and passed a resolution to undo rules helping municipalities and states set up payroll deduction retirement plans that automatically enroll private-sector workers lacking access to such savings programs.

“There is a retirement crisis brewing in America, because workers do not have enough access to retirement savings programs and because there is no retirement system for low income earners. The rule being repealed was helping the states address that problem,” said Bob Stammers, head of investor education for the CFA Institute, in a statement.

The CFA Institute says that the rollback of the rule that lets states create retirement savings accounts for low-income workers “increases the potential for creating generation of retirees living under the poverty line.” It estimates these plans stood to benefit some 63 million American workers who lack access to retirement plans.

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VERMONT

http://www.investmentnews.com/articl...ement-plan-for

Vermont poised to become latest state to set up retirement plan for small businesses
It would be the ninth state to pass legislation creating a plan, and differs from other states' auto-IRA and marketplace approaches

Vermont will likely become the latest state to create a retirement plan for its small businesses, in a play to boost retirement savings by increasing the number of private-sector employees covered by a workplace plan.

The Vermont legislature passed an economic-development bill, S.135, establishing the Green Mountain Secure Retirement Plan, a multiple employer plan available on a voluntary basis to employers with 50 employees or fewer.

Vermont intends to implement the program starting in January 2019, said Tim Lueders-Dumont, policy director for Vermont's Office of the State Treasurer. Governor Philip Scott, a Republican, is expected to sign the legislation, Mr. Lueders-Dumont said.


When signed, the bill will make Vermont the ninth state to enact legislation creating a state retirement program aimed at small businesses. California was the last state to enact legislation, in September 2016. That bill created an automatic-enrollment, payroll-deduction IRA (or, auto-IRA) program similar to those being set up in four other states (Illinois, Connecticut, Maryland and Oregon).

.....
Vermont's MEP program, geared toward the more than 100,000 private-sector employees in the state who don't have access to a workplace plan, differs from these auto-IRA programs.

A state-sponsored MEP will allow participating employers in Vermont to join one common 401(k)-type plan, rather than sponsoring an individual 401(k). Unlike with auto-IRAs, the MEP would be covered by The Employee Retirement Income Security Act of 1974, have the same contribution limits as 401(k) plans and allow for employer contributions. Employees would be automatically enrolled, but employer participation in the Vermont plan is voluntary.

"From the perspective of the participant, it's a regular 401(k) plan," said Aron Szapiro, director of policy research at Morningstar Inc.

Massachusetts is the only other state to date to have enacted legislation to create a state-sponsored MEP. The Department of Labor in 2015 issued guidance to encourage states to sponsor MEPs.

But observers say the Vermont legislation goes further, because Massachusetts would only cover non-profit organizations when it goes into effect.

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Originally Posted by campbell

VERMONT

http://www.investmentnews.com/articl...ement-plan-for

https://www.ai-cio.com/news/vermont-...ll-businesses/

Vermont Bill Creates Retirement Plan for Small Businesses
Volunteer program is aimed at companies with 50 or fewer employees.

The Vermont General Assembly has passed a bill to create a voluntary public retirement option for small businesses known as the Green Mountain Secure Retirement Plan.

The plan will be based on a multiple employer plan model, and open to businesses with 50 employees or fewer that do not offer a retirement plan, as well as to self-employed workers. If an employer adopts the program, auto-enrollment of employees will occur, but employees will have the choice to opt out.

.....
The committee that advised the legislature on the bill recommended a three-year check-in after the start of the program, when an analysis of participation and potential strategies to increase participation would take place. The program is expected to be implemented in January 2019.

The program will initially be supported by fees that would be paid by the program’s participants, but allows for the possibility for employer contributions in the future. It also said that until sufficient assets have been accumulated, program costs will exceed revenues during the startup phase.

The Treasurer’s Office will have financial service providers subsidize the startup cost in exchange for a longer-term contract, essentially loaning its own capital to the program. If the committee determines that additional financial support is necessary for start-up and/or ongoing costs, the Treasurer will inform the general assembly prior to any decision on implementation.

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http://www.pionline.com/article/2017...issue=20170607

Philadelphia controller pushes for voluntary multiple employer plan; Vermont enacts one

Philadelphia small businesses support the city setting up a voluntary retirement plan for them, according to a report released Wednesday by city Controller Alan Butkovitz showing that 60% of small businesses do not offer a retirement plan for employees.

The report analyzed two options: voluntary open multiple employer plans and government-mandated automatic-enrollment IRAs that several states have enacted or considered. It included a survey of more than 200 local small businesses, 92% of whom said they would support a city-sponsored retirement plan if it were voluntary.

Based on the findings, Mr. Butkovitz is advocating that the city create an open multiple employer plan for businesses to join voluntarily, with the city designating or creating an authority to administer and manage the plan. He also called for the city to conduct a financial and legal feasibility analysis to determine the implications, risk factors and sustainability of implementing a city-sponsored plan. “I urge City Council to aggressively adopt legislation that would establish this type of retirement plan,” Mr. Butkovitz said in a statement.

With federal legislation signed by President Donald Trump in May removing safe harbors for states and cities to create retirement programs for private-sector employees, “the federal government has made it even more difficult for private businesses and their workers to prepare for retirement,” and puts more pressure on local governments to act, he said.

“Expanding savings programs to small businesses gives employees an accessible retirement investment tool that could alleviate the cost of public assistance for the state and municipality,” he said in the statement.

The report is available on the controller's website.

Separately, Vermont Gov. Phil Scott was scheduled to sign legislation on Thursday creating the nation's first voluntary open multiple employer plan for the private sector. It should be in place by 2019.

Vermont Treasurer Beth Pearce, who advocated for it, said during a Georgetown Center for Retirement Initiatives seminar Wednesday that the proposal had nearly unanimous support, with only one legislator voting against it. Employers choosing not to participate will have other options made available through a marketplace to be set up later, she said.

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OREGON

http://www.thinkadvisor.com/2017/07/...paign=07102017

Trump Is No Hurdle for Oregon’s State-Run Auto-IRA Plan
The OregonSaves retirement program entered a pilot phase on July 1 with 11 employers

Oregon is the first state to implement a state-sponsored auto-enrollment individual retirement account program, OregonSaves, continuing to move forward despite the resolution President Donald Trump signed in May that took away “safe harbor” regulations for these state-run plans.

According to James Sinks, director of communications and stakeholder relations for the Oregon State Treasury, the recent administration’s actions “didn’t really do anything except take us back to the beginning.”

In mid-May, Trump signed H.J. Res 66 into law, which in effect invalidated the Department of Labor’s “safe harbor” regulations on savings arrangements established by states for nongovernmental employees. The resolution closed a regulatory loophole created by the Obama administration that would allow states to offer government-run retirement accounts to private-sector workers without the consumer protections provided by the Employee Retirement Income Security Act.

However, Oregon passed legislation for its state-run retirement program in 2015 and had started building its plan before the safe harbor was created at the federal level.

“I think that there’s been some confusion and coverage that somehow this congressional action cut the legs out from under this program,” Sinks told ThinkAdvisor. “It didn’t. It just took away … a safe harbor at the U.S. Department of Labor that wasn’t there at the beginning and isn’t there now.”

According to a letter written by Tobias Read Oregon's state treasurer, the safe harbor clarified that “state-administered plans are not employer-directed. As such, employers have no oversight over the plan or investment options, no ability to match contributions, and no fiduciary obligations.”

There are still safe harbors under ERISA, enacted in 1974, that OregonSaves is following, Sinks explained.

“The elimination of the federal safe harbor didn’t really change a whole lot because we were all following the ERISA laws that were there anyway,” Sinks said. “With our legal counsel, we are confident that we are within the guidelines of the ERISA laws before.”

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MyRA to close

http://www.pionline.com/article/2017...ing-low-demand

Treasury Department ends MyRA retirement program, citing low demand

The U.S. Treasury Department announced on Friday it is winding down the federal MyRA retirement savings program.

A Treasury Department news release said the decision to shut down the program came after "a thorough review" that found it "not cost effective," saying that demand since it was announced has been "extremely low" and that U.S. taxpayers have paid $70 million to maintain the program since 2014.

President Barack Obama announced the program in his State of the Union speech in January 2014, as a retirement savings bond program aimed at lower-wage workers not enrolled in retirement savings plans, with tax benefits similar to individual retirement accounts and accounts that could be rolled into IRAs when balances reach a sizable amount. MyRA, short for "My Retirement Account," officially launched in November 2015.


U.S. Treasurer Jovita Carranza in the Treasury Department news release said the department "will be communicating frequently with participants to help facilitate a smooth transition to other investment opportunities."

A group of leading congressional Democrats had asked Treasury Secretary Steven Mnuchin on July 14 to do more to promote the program. Sen. Patty Murray of Washington, ranking member of the Senate HELP Committee, and others implored the Treasury Department "to demonstrate its commitment to the MyRA program."