DOL Proposal Favors State-Run Plans Over Private Sector, Creates Uneven Playing Field
ARLINGTON, VA. – The Labor Department’s proposal to help state-run retirement plan solutions does so at the expense of the private sector, giving those government-run alternatives an unfair advantage, according to the American Retirement Association.
The proposal modifies the current payroll deduction safe harbor to allow automatic enrollment provisions without making the plan an ERISA arrangement, if there is a mandate to offer the plan and the state program is the default option. Moreover, while some state-run programs (notably Illinois) allow a traditional ERISA retirement plan, such as a 401(k), to satisfy the mandates, the Labor Department’s proposal would not extend an ERISA shield to private sector automatic enrollment payroll deduction IRAs.
Additionally, the Labor Department’s sub-regulatory guidance, which is effective immediately, would allow states to sponsor retirement multiple employer plans (MEPs) for employers operating in the state. This stands in sharp contrast to the Labor Department’s long-standing reluctance to enthusiastically embrace or sanction the use of these so-called “open” MEPs for these programs in the private sector.
“Both pieces of guidance are misplaced attempts by the Administration to promote coverage by giving marketplace advantages to states as retirement plan providers, with no reasonably apparent policy justification to suggest states are somehow going to do a better job providing retirement plan products,” said Brian Graff, CEO of the American Retirement Association. “We believe this proposal creates an un-level playing field, and uses regulation to give state-run alternatives an unfair, and unwarranted competitive advantage in the retirement plan marketplace.”
Media Contact: Don Jackson, (703) 516-9300 Ext. 169, firstname.lastname@example.org