On February 15, the House of Representatives passed H.J Res. 66 & H.J. Res. 67, resolutions that would repeal Department of Labor (DOL) regulations that make it easier for states and certain cities or counties to establish their own state-run automatic retirement savings programs. We are writing to respectfully urge you to vote “No” on these resolutions when the vote reaches the Senate.
More than half the workforce in this country—or 55 million workers—do not have employer-sponsored retirement plans, meaning tens of millions of people have little or no money set aside for their retirement. In some states, as little as 38% of the workforce participates in an employer-based retirement savings plan. While uncovered individuals could set up their own IRA, the fact is that very few save outside of a workplace payroll withholding program. That so many people could experience financial instability after working for years is very troubling and poses long-term fiscal challenges for our nation.
Federal efforts to address this huge gap in coverage have fallen short, and this inaction has inspired states to develop their own innovative solutions to protecting the retirement security of uncovered workers, including millions of low-income households. One of the most promising developments are state-run automatic enrollment programs. Research has shown that automatic enrollment has the potential to raise participation rates above 90%, while at the same time remaining fully voluntary for workers.
Five states (California, Oregon, Illinois, Connecticut and Maryland) are poised to implement their own innovative solutions to closing the retirement gap and could soon cover as many as 13 million workers. Many more states are considering similar plans, along with other forms of state-facilitated programs.
Opposition to these programs includes an argument that consumer safety is compromised because the regulations in question offer an exemption from the Employee Retirement Income Security Act (ERISA). The regulations purposefully clarify the existence of the so-called “safe harbor.” However, state-sponsored programs do not get rid of these responsibilities, but rather shift them to the programs themselves. The regulations therefore preserve accountability and ensure consumer safety, while alleviating the burdens that keep small businesses from offering retirement benefits. Not surprisingly, small businesses are highly supportive of these programs.
It is also important to recognize that other programs have shown it is possible to operate safe, cost-friendly state-sponsored savings programs that have strong bipartisan support. For example, state-sponsored individual savings accounts for college—or 529 plans—serve as the model for state-sponsored retirement programs. They are safe, low-cost and very popular with the public, as well as with politicians on both sides of the aisle.
If H.J. Res 66 & H.J. Res 67 pass, they will slow down the development of these simple programs, making it much harder for small businesses to offer a retirement vehicle to the millions of their workers that would benefit from a secure, safe and stable retirement, ultimately endangering their long-term well-being and putting greater burden on the cities, counties and states in which they live. As currently designed, the plans being implemented by the states will be financially self-sustaining—requiring no ongoing taxpayer dollars and no employer contributions.
Passing H.J. Res. 66 and 67 would also render DOL unable to make policy adjustments to support small businesses and states as they work to help their employees build savings. Passing the resolutions would run counter to the desires of small business owners, 86% of whom support such plans.
With all of this in mind, we respectfully urge you to vote against H.J. Res 66 and H.J. Res 67. State-sponsored programs are critical innovations that have the potential to ensure the financial security of millions. Protect the ability of states to come up with their own solutions to look after the financial well-being of their workers by voting “No” on these resolutions.
We are happy to provide additional information or answer any questions. Thank you for your support.
CFEDFamily Centered Social Policy Program, New America