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About one-third of American workers lack access to a retirement plan at work. For older Americans, inadequate retirement savings can mean sacrificing or skimping on food, housing, health care, transportation, and other necessities. President Obama has long supported federal legislation to require automatic enrollment of new workers in payroll deduction IRAs if they lack access to a 401(k) -type plan through their employer.  In the absence of Congressional action, some states have passed laws to set up state-based savings plans and require employers not currently offering workplace plans to automatically enroll employees into IRAs.  Others are looking at ways to encourage employers to provide coverage under state-administered 401(k)-type plans or other retirement alternatives including IRAs and the Treasury's new starter savings program, myRA.  However, many of these states remain concerned about preemption by ERISA.  On July 13, 2015, the President directed the Department to publish a proposed rule clarifying how states may offer retirement savings arrangements to private-sector employees in ways that are consistent with federal laws governing employee benefit plans.  The proposal will set forth circumstances in which a state could establish a payroll deduction savings program, with an automatic enrollment feature, without giving rise to an employee pension benefit plan under ERISA.

Statement of Need:

The proposal responds to the President’s directive to the Department of Labor, issued at the 2015 White House Conference on Aging, to publish a proposed regulation by the end of 2015 to support the efforts of a growing number of states trying to promote broader access to workplace retirement saving opportunities for America’s workers.  The regulation would clarify that state savings initiatives would not cause the establishment of ERISA covered employee benefit plans, so long as the conditions of the regulation are met.

Summary of the Legal Basis:

Section 505 of ERISA, 29 USC 1135, provides the Secretary of Labor with broad authority to prescribe such regulations as he finds necessary and appropriate to carry out the provisions of Title I of the Act.  Section 3(2) of ERISA, 29 USC 1002, defines the term "employee pension benefit plan".  The Department’s regulations at 29 CFR 2510.3-2 clarify the term "employee pension benefit plan" by identifying certain specific plans, funds and programs that do not constitute "employee pension benefit plans".

Alternatives:

Since the President directed the Department to publish a proposed rule clarifying how states may offer retirement savings arrangement to private-sector employees, there is no alternative.

Anticipated Costs and Benefits:

Undetermined.

Risks:

Undetermined.