State-Run Private Sector IRA Comes Up Short in Centennial State

By ASPPA Net Staff • April 28, 2017 • 0 Comments
Colorado’s proposal to create a state-sponsored retirement savings program for private-sector workers fell short in a vote in the state Senate on April 26.

The vote to postpone consideration of the measure indefinitely fell along party lines in the GOP-led Senate Committee on State, Veterans, & Military Affairs. The bill was introduced in the Colorado House of Representatives on March 24; the House passed the measure on April 19 in a 37-28 vote.

What the Bill Would Have Done


The bill provided for the establishment of the Colorado Secure Savings Plan, an auto-IRA program for private-sector employees. Employers with five or more employees in the state without a qualified plan would eventually have be required to automatically enroll their workers into the program.

The bill would have created a Board of Trustees, consisting of the State Controller, the Director of the Governor's Office of State Planning and Budgeting, and seven additional trustees appointed by the governor and confirmed by the Senate.

If, based on the required financial feasibility study, the Board had determined that the program would be self-sustaining and would promote greater retirement savings for private-sector employees, the Board would recommend to the Colorado General Assembly that the program be implemented. However, the general assembly would have to pass additional legislation authorizing the program’s implementation.

The trustees on the board would have a fiduciary duty to the plan's enrollees and beneficiaries and would have been required to perform a wide range of functions to monitor and administer the plan and manage its assets.

The bill specified the process by which the Board would have been required to engage an investment manager to invest the assets of the plan. It also:

  • specified the investment options the Board would be required to create;

  • would have created the fund as a trust outside of the State Treasury;

  • specified that the fund would include the individual retirement accounts of enrollees in the plan;

  • would have allowed the board to use a certain percentage of money in the fund for the administrative expenses of the plan; and

  • stated that the money in the fund would not be property of the state and cannot be commingled with state money.

Rolling Back Regulation?

Earlier this month President Trump signed legislation that blocks the Obama-era DOL’s safe harbor exempting states’ and municipalities’ auto-IRA programs from ERISA, following passage by the U.S. Senate and House of Representatives of Congressional Review Act (CRA) resolutions. In February a similar resolution was passed by the House of Representatives to nullify the safe harbor rules designed to provide for state-run plans for private sector workers, although it has not yet been addressed by the U.S. Senate.

Under the CRA, Congress has a window of time to consider and pass legislation to overturn any significant regulation if that legislation is signed by the president. The current CRA window applies to any significant Obama-era rule that was either finalized or made effective after June 13, 2016. The DOL’s state plan rule was finalized in August 2016 and became effective in October 2016.

However, the elimination of the safe harbor’s provisions only removes certain guideline protections for these programs – it does not block them from happening, as long as they don’t run afoul of ERISA. And, with time running out, the state-run version has not yet been approved by the Senate, with a number of GOP Senators expressing concerns about federal moves that would be seen as preempting state initiatives.