ASPPA Seeks Level Playing Field in Upcoming DOL Rules on State-Run Plans
Impending DOL regulations intended to pave the way for state-run retirement programs for private sector workers may create an unfair playing field and widespread confusion over ERISA preemption, as well other potentially damaging changes, says ASPPA Executive Director Brian Graff.
Graff, joined by Judy Miller, the American Retirement Association's Director of Retirement Policy, kicked off the 2015 ASPPA Annual Conference in a Sunday afternoon general session Oct. 18.
Retirement saving has become a Tier 1 political issue, says Graff, with elected officials at the state and federal levels focusing on coverage and access. Politicians are growing more impatient at the gap in coverage in private sector DC plans, Graff noted, drawing a parallel to the health care debate that resulted in President Obama's health care reform. In both cases, he said, "lack of coverage, access and cost" are the focus of policymakers. The states have taken the lead, stepping in and setting up government-run programs for private sector workers that don't have access to a employer-provided plan. "They believe that government is in a better position than we are" to solve the access problem, noted Graff. But a major hurdle stands in the way of these plans: ERISA's application to them.
Earlier this year, the federal government stepped in, as President Obama instructed the DOL to pave the way for faster development and implementation of state-run plans by easing ERISA's application to them via regulations.
Those regulations are now undergoing review at the White House Office of Management and Budget, meaning that "we may see them any day now," Graff said. The rules are in two parts:
1. Modifications to the rules governing payroll deduction IRAs providing that state programs are not subject to ERISA if the employer is required to participate in the plan -- even though private payroll deduction IRA proigrams would be. "This would create a 'non-level' playing field," Graff said.
2. Guidance that will allow state to create open MEPs that would operate as if they were closed MEPs. Massachusetts and several other states are looking at this approach, Graff noted.
ASPPA wants this inequity issue to be addressed, Miller noted, seeking "at least" a level playing field for private sector plans. Formulation of the rules "is evidence that the President can't get a legislative solution," said Miller.
She added that she expects to see the proposed rules "very soon." The IRA piece must be in the form of a proposed reg, she noted, so it must go through a review and comments period. Since the Obama administration wants the rule to be finalized before the end of 2016, "it's on a fast time schedule." The MEP guidance will be effective right away, said Miller.
Miller also questioned the efficacy of MEPs in expanding coverage and access. "I don't believe for a second that if all of a sudden we have many more MEPs, that will move the needle on coverage," she said.
How would multiple state regulatory schemes -- all free of ERISA -- impact the private retirement system? Several questioners in the audience noted that various issues, such as ERISA preemption, multistate employers, state of incorporation, and employees who work live and work in different states, would result in widespread confusion in the market.
Miller noted a 2013 ASPPA proposal highlighted open MEPs using a designated service provider approach. The essence of that proposal was picked up in the SAFE Act and the USA Accounts bills introduced in the 113th Congress. "We will continue to lobby for a level playing field," she asserted.
Said Graff, "We don't want the government in our soup. We believe that any significant role of the public sector in the private retirement system will degrade the system and result in lower performance, lack of innovation and higher costs in the long run. In that scenario, the American worker loses."
You'll find our other coverage of the 2015 ASPPA Annual Conference in the Conferences "station" on ASPPA Net.