Senate Committee on Retirement and Insurance
2300 N. Lincoln Blvd.
State Capitol Building
Oklahoma City, OK 73105
RE: Oklahoma Senate Bill 934
Ladies and Gentlemen:
The ERISA Industry Committee (“ERIC”) is writing regarding Oklahoma Senate Bill 934 (“SB 934”) to urge the legislators to acknowledge the preemption provisions under federal law—The Employee Retirement Income Security Act of 1974 (“ERISA”)—by exempting employers that already provide access to a retirement savings plan from the requirements of SB 934.
I. ERIC’s Interest in Senate Bill 934
ERIC is the only national association that advocates exclusively for large employers on health, retirement, and compensation policies at the federal, state, and local levels. ERIC members are leaders in every industry sector and provide comprehensive benefits to tens of millions of active and retired workers and their families across the country. ERIC has a strong interest in bills such as SB 934 that affect the ability of employers to provide cost-effective retirement programs as well as the ability of employees to receive such benefits.
ERIC supports efforts to enhance and promote retirement savings opportunities, including the establishment of state-administered retirement plans. However, we oppose state policies that conflict with the framework and guidelines set forth under ERISA. ERISA enables employers to establish voluntary self- insured retirement plans that meet the needs of their workforce and sets forth the rules that employers must follow in order for their voluntary plans to qualify under federal law.
Retirement plans, specifically employer-sponsored plans, are effectively enabling millions of Americans to save for retirement. ERIC recognizes and supports policies that increase access to retirement plans but is extremely concerned about recent state efforts to override or regulate employers that already provide a plan regulated by federal law. ERISA was enacted to provide a uniform set of standards for employer-sponsored benefit plans. As such, large employers that operate in multiple jurisdictions are able to design a retirement plan that allows employees in all 50 states to be eligible for the retirement plan without differing criteria based on residence.
Other states, such as Oregon, Illinois, and California, have recognized this federal preemption and exempted employers that provide retirement plans from the general requirements of the state-administered retirement plan. Moreover, to protect ERISA preemption from administrative mandates imposed by state retirement plans, ERIC challenged in federal court the reporting requirement imposed by the OregonSaves program on employers that already offer an ERISA-regulated retirement plan to their workers. ERIC members are now exempt from the reporting requirement.
II. ERIC Recommendations
ERIC encourages mandatory state or local retirement plans to focus their efforts solely on employers that do not provide a retirement plan and explicitly not regulate employers that do provide a federally-governed retirement plan. To abide by the preemption provisions in ERISA, we strongly recommend that SB 934 be amended to exempt employers that already provide a plan that complies with federal rules. Specifically, we recommend that SB 934 be amended to state:
“An employer that has sponsored, maintained, or contributed to a retirement plan under sections 401(a), 401(k), 403(a), 403(b), 408(k), or 408(p) of the Internal Revenue Code at any time during the preceding two calendar years or currently sponsors, maintains, or contributes to a retirement plan is automatically exempt from the state-administered program.”
In addition, employers that maintain retirement plans under ERISA should also be exempt from any notice and administrative requirements of the state program. Plan sponsors of tax-qualified retirement plans are already under an immense compliance burden imposed by federal law. Additional reporting requirements for qualified employers are not only preempted by ERISA, but also would only serve to deter employers that do not already offer a retirement savings plan from establishing or providing one.
Ultimately, ERIC shares your goal of increasing access to retirement savings plans for Oklahoma employees. However, we believe that a mandate on employers with robust, tailored retirement savings plans could cause them to abandon these plans and would detract from the overall goal of increasing retirement plan access to employees throughout the state. Therefore, this rulemaking should not impose any burden on employers that are already satisfying the intent of the bill, which is to provide access to a retirement savings plan.
ERIC appreciates your consideration of our concerns. If you have any questions concerning our comments, or if we can be of further assistance, please contact us at (202) 789-1400 or arobinson@ERIC.org.
Senior Vice President, Retirement and Compensation Policy