Congress Takes Aim At State Efforts To Boost Retirement Savings

May 04--The Republican-led Senate approved legislation Wednesday to end an Obama administration policy that encouraged state-sponsored retirement savings programs, a move that could undermine a bipartisan effort in Maryland to offer retirement accounts to workers who don't have them.

Maryland is one of five states that will soon allow businesses that don't offer retirement plans to enroll workers in a program set up by a state board. Supporters say the program will promote savings in a state where an estimated 1 million people don't have access to any retirement plan at work.

But Republicans on Capitol Hill have questioned the need for state and local government involvement in retirement planning. The Senate voted 50-49 to reverse a 2016 Department of Labor rule that clarified the legal landscape for the plans by exempting them from federal requirements.

The House passed the measure in February. President Donald Trump, who has rescinded other regulations approved by the Obama administration, is expected to sign the bill.

"Though these state-run plans might not seem too bad on the surface, what they really add up to is more government at the expense of the private sector and American workers," Senate Majority Leader Mitch McConnell said.

Democrats point to studies that find nearly a third of Americans have no plan for retirement beyond Social Security. They said small businesses want to offer retirement benefits but can't afford to.

"Why is it that the Senate is working to pass a law that will deny millions of our fellow Americans access to the kind of retirement savings plans that we have access to as United States senators?" asked Sen. Chris Van Hollen, a Maryland Democrat.

The Democratic-controlled Maryland General Assembly passed -- and Republican Gov. Larry Hogan signed -- a law last year to create the state's retirement savings program. The law doesn't require businesses to take part, but encourages them to do so by waiving an annual $300 business registration fee.

Maryland officials said they expect to move forward with the state program despite the congressional action. But some are concerned that fewer businesses will take part unless they are confident that they won't be sued for violating the federal regulations the Obama-era order waived.

"These resolutions wouldn't prohibit state efforts; we can and will set up Maryland's program in any case," Joshua Gotbaum, chairman of the Maryland Small Business Retirement Savings Board, wrote to the state's congressional delegation this year. But they "could make small businesses nervous about being sued."

Retirement plans are regulated by the Employee Retirement Income Security Act of 1974, which sets standards and protects participants from poor management. But the law's complexity makes it difficult for small businesses to comply, and it might expose some employers to litigation if their retirement plans run into trouble.

The Department of Labor approved a regulation last year to exempt the state-organized plans from the federal requirements.

State Sen. James C. Rosapepe, a member of the retirement savings board, was one of the original supporters of the Maryland program. He predicted that the congressional action would have little impact on the state's ability to get its plan running.

"From Maryland's point of view, it's a nothingburger," the Prince George's County Democrat said.

Rosapepe said retirement savings board members hope workers will be able to make contributions to plans in late 2018 or in 2019.

Hogan put $400,000 into his budget to help with startup costs, Rosapepe said.

Rosapepe said the law's authors anticipated somebody might sue to stop the program, and designed it to withstand that.

Sarah Mysiewicz Gill, also a board member and a senior legislative representative at AARP, said rescinding the 2016 rules "makes things more complicated, more murky."

With Americans living longer, supporters say, more workers are in danger of reaching retirement with little money beyond what comes from Social Security and Medicare.

Del. C. William Frick, who sponsored the bill in the House of Delegates, said it is a well-thought-out attempt to deal with the "silver tsunami" of Marylanders approaching retirement age without sufficient savings.

"There's a huge crisis when it comes to retirement savings," the Montgomery County Democrat said. "That's just a fact. It's not a partisan issue."

Frick said the Maryland law imposes no significant costs on businesses. He noted that employers are not required to match employees' contributions.

But Mike O'Halloran, with the Maryland chapter of the National Federation of Independent Business, said the law is still a problem for many of members.

"To us, this is just the camel's nose under the tent," O'Halloran said. "What happens in two or three years if enrollment that proponents say will take place doesn't happen?"

State Sen. Andrew Serafini, a Washington County Republican and financial consultant who helped craft the Maryland law, said Republicans on Capitol Hill might have a good case for blocking some state laws setting up retirement plans, but not Maryland's.

"I think it is the best model out there," he said. "I think we struck a good balance."

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