DOL Ready to Help States with Plans, ERISA or No ERISA

By ASPPA Net Staff • August 25, 2015 • 0 Comments
The Department of Labor (DOL) stands ready to assist state governments when they work to establish public retirement plans for private-sector workers, regardless of whether those plans are covered by ERISA, according to EBSA chief Phyllis Borzi.

The White House set the tone with President Obama’s July 13 directive, which he announced at the 2015 White House Conference on Aging, that the DOL provide a clear path forward for the states to create retirement savings programs. He directed DOL Secretary Thomas Perez to publish a proposed rule by the end of 2015 clarifying how states can set us such plans; later in July, in the DOL blog Perez said the DOL will do so.

In a recent interview with Institutional Investor, Borzi elaborated on the nuts and bolts of implementing the president’s directive. She said it makes no difference whether a plan is established under ERISA. “Part of what we do is help states evaluate sets of facts that are brought to us as to whether or not a plan under ERISA has been established,” Borzi said. “If a plan is established under ERISA, that means that plan is subject to various federal rules.”

According to Borzi, the DOL does not have legal authority to issue a binding assessment of whether ERISA will preempt a particular state regulation or law; that’s up to the courts. And even that does not offer clarity. Said Borzi, “We have no legal precedent to rely on this with any great specificity; this really is an issue of first impression, which means we all start from zero.”

At the very least, she said, the DOL can help states by giving them some guidelines regarding what the states can do. “Our approach is to avoid ERISA at all costs,” she said, adding, “the important protections that it has brought to working men and women and their families cannot be understated. But some states have decided that’s the approach they want to take — and that’s perfectly fine.”

As for states that seek to establish plans not covered by ERISA, Borzi said EBSA will provide some guidance on what they can do in that regard. She says that most states rely on DOL payroll deduction IRA guidance. “Our lawyers tell us that the best way to provide reliable guidance to the states is to go back and amend those regulations and modernize them,” she remarked.

The most important thing, Borzi said, is consumer protection — and states have a key role in ensuring that it takes place. “We believe that the most important consumer protection we could have is to have the state establishing a plan and overseeing it.” And she expressed confidence in their ability to do so, remarking “We have absolute confidence that the state has the best interest of its citizens in mind. We feel comfortable enough to adjust the rules a bit for states that want to do this, because we know they want these plans to succeed and have the interests of their citizens in mind.”

Borzi said the DOL will be issuing the guidance by the end of the year.