ARA Comments on DOL’s Proposal on State-Run Savings Plans
- The American Retirement Association (ARA) submitted a comment letter Jan. 15, 2016 to the Department of Labor (DOL) concerning a proposed regulation under which an individual retirement account (IRA) plan, if established and maintained under a payroll deduction program mandated under state law, would not be considered to be an “employee pension benefit plan” or “pension plan” under Title I of ERISA.
Says the letter: “The ARA generally agrees with and supports the DOL’s underlying goal of expanding coverage. We are concerned, however, that the proposed rule creates different standards for payroll deduction IRA programs administered by a state and those administered by private sector providers outside of a state program.
“Furthermore, we believe the lack of a private sector alternative operating alongside the various state programs would be contrary to the overall objective of increasing access to workplace retirement savings programs. This would be to the detriment of improving retirement security for American workers. This is especially true in states that have no mandate or in states that exempt certain employers from a mandate.
“We believe that because the proposal significantly limits the employer’s involvement, it could and should be extended to all payroll deduction IRA programs irrespective of whether provided under a state law mandate, a state-established arrangement or an arrangement offered by a private sector provider.
“The DOL’s regulatory efforts should recognize and support the evolution of enrollment procedures that increase voluntary savings. The ARA also believes the mere presence of an automatic enrollment feature in a payroll deduction IRA Program should not cause the program to be subject to Title I of ERISA. As a result, the ARA supports the DOL’s position in the proposed regulation that an automatic enrollment feature does not automatically result in ERISA coverage.
“The ARA strongly believes that the employer’s involvement in a payroll deduction IRA Program established and offered by a private sector vendor can be significantly limited to avoid concerns regarding the employer’s role in establishing and maintaining a plan.”
In the letter, the ARA makes the following recommendations:
1. That the non-ERISA safe harbor under the proposed rule be expanded to apply to comparable payroll deduction programs established and administered by private sector providers; and
2. That the non-ERISA safe harbor under the proposed rule be available to any payroll deduction IRA program without regard to whether it is mandated by a state law (or offered under a state-established IRA program). Alternatively, the ARA recommends that the final rule include an amendment to the non-ERISA safe harbor contained in DOL Reg. Section 2510.3-2(d) to permit automatic enrollment features.
The letter goes on to say, “The ARA agrees that the employer’s involvement should be limited to making available — without endorsing it — the state (or private sector provider(s)) IRA program,” and that, accordingly, they should:
- collect employee contributions through payroll deductions and remit them to the IRA custodian or trustee;
- provide notice to the employees and maintaining records regarding the employer’s collection and remittance of payments under the program;
- provide information to the state (or a private sector provider) that is necessary to facilitate the operation of the program; and
- without endorsing the program, distribute information about it to employees, otherwise permitting the state (or a private sector provider) to publicize the program to employees.
Furthermore, the letter says, “We believe that the enumerated conditions properly and sufficiently limit the employer’s role in offering the arrangement. The presence or absence of a state law mandate does not significantly affect the employer’s involvement in simply facilitating a voluntary employee savings program. If employer involvement is otherwise limited, the proposed non-ERISA safe harbor should apply. Likewise, it should apply regardless of whether the program is established through a state or private sector provider.
“The expansion of the safe harbor to states where there is no legal mandate would be an important tool in increasing workplace retirement savings programs. Private sector providers in these states would be an integral part of expanding payroll deduction IRA programs. In addition, if the ARA’s recommendations are followed, automatic enrollment features could finally be made available in all states to the benefit of increasing the retirement security of American workers.”