Honorable Mitch McConnell
U.S. Senate Majority Leader
S-230 The Capitol
Washington, DC 20510
RE: Congressional Review Act Resolution of Disapproval for State and Local Retirement Plans
Dear Majority Leader McConnell:
The ERISA Industry Committee (ERIC) is pleased to support S.J. Res. 32 & 33, resolutions of disapproval under the Congressional Review Act (CRA) for the repeal of the Department of Labor’s Rules on Savings Arrangements Established by States for Non-Governmental Employees and Savings Arrangements Established by Qualified State Political Subdivisions for Non-Governmental Employees.
ERIC is the only national association that advocates exclusively for large employers on health, retirement, and compensation public policies at the federal, state, and local levels. ERIC’s members provide comprehensive retirement benefits to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals, such as mandatory state and local retirement programs, that negatively impact its members’ ability to provide cost-efficient retirement programs.
Most mandatory state and local retirement proposals are based on the public policy goal of increasing access to retirement plans for America’s workforce. We share this same goal; however, we are discouraged by recent proposals at the state and local level that unnecessarily disrupt active employer- sponsored retirement plans that are already in full compliance with federal laws and regulations. These proposals would force plan sponsors of tax-qualified retirement plans to alter aspects of their retirement plans to be exempt from the state or local mandate. For example, the Oregon State Retirement Savings Plan, scheduled to be implemented later this year, provides in a proposed rule that a conditional exemption from the program for employers that provide a retirement plan to all employees will be provided, but only if the employer enrolls all employees within 90 days of hire. Further, the proposed rule for the Oregon State program states that employers who receive a conditional exemption (after filing an application) may be required to register under the state-run retirement plan at a later date. While the State of Oregon has since clarified via informal guidance that the 90-day rule does not apply to employers who already provide a retirement plan, it is clear that state and localities will be creative in attempting to regulate employers who already provide a quality retirement plan.
The overwhelming majority of tax-qualified retirement plans sponsored by ERIC’s members – the nation’s largest employers – are individually designed plans with complex plan designs that contain unique provisions reflective of individual company benefit priorities and culture. In addition, many large company retirement plans are tailored to meet the overall compensation and employee benefits goals of the company. As a result, ERIC member company retirement plans generally do not utilize standard enrollment timeframes, eligibility criteria, auto-enrollment features, or company contribution formulas.
The Employee Retirement Income Security Act of 1974 (ERISA) was passed into law to provide a uniform minimum set of standards for employer sponsored benefit plans. As such, large employers that operate in a number of jurisdictions are able to design a retirement plan that allows employees in all 50 states to be eligible for the retirement plan without differing eligibility criteria based on residence. If states continue to implement state-run retirement programs that infringe on employers’ ability to provide a consistent retirement plan across state lines, we may experience a decrease in tax-qualified employer sponsored retirement plans. Keep in mind, the employer retirement system provides the bulwark of retirement security for working Americans. And, most employers provide a generous matching or employer contribution to individual retirement accounts which significantly increases retirement savings for workers and families.
For employers, it is important that they be able to design plans that work effectively and efficiently based on the needs of their workforces and the industries in which they operate. Rules that are too onerous or restrictive can chill an employer’s commitment to offer a retirement plan. We can all support a desire to increase access to retirement plans for America’s workforce, but we must protect the value provided by the current retirement plan system and avoid unnecessary burdens that could result in likely unintended adverse consequences to the country and its workers, retirees and families.
ERIC supports the resolutions of disapproval on the Labor Department’s state and local retirement regulations, with the hope that the new Administration can carefully consider how best to authorize the use of state and local retirement plans without negatively impacting employers providing retirement benefits to their workers.
If you have any questions concerning our comments, or if we can be of further assistance, please contact us at (202) 789-1400 or whansen@ERIC.org.
Senior Vice President, Retirement Policy
Cc: The Honorable Chuck Schumer, Senate Minority Leader Senator
Orrin Hatch, Chairman, Senate Finance Committee
Senator Ron Wyden, Ranking Member, Senate Finance Committee
Senator Lamar Alexander, Chairman, Senate Health, Education, Labor & Pensions Committee
Senator Patty Murray, Ranking Member, Senate Health, Education, Labor & Pensions Committee