Washington, D.C., (July 15, 2015) – The White House plan to help states find a way around safeguards designed to protect retirement plan participants is misguided and conflicts with federal statutes.

Announced this week at the White House Conference on Aging, the Department of Labor (DOL) will propose a new regulation to help states offer retirement plans for private-sector workers, yet avoid the responsibilities associated with the Employee Retirement Income Security Act of 1974 (ERISA). ERISA, which is enforced by DOL, establishes strict rules that retirement plan sponsors must follow to ensure workers’ retirement savings are protected.  

The new rules would likely deprive the low and middle-income workers subject to these state-run plans the ERISA protections they would enjoy if covered by a plan offered by the private sector. 

ACLI agrees with the administration’s goal to help people save for retirement. But rather than drafting new regulations to support risky and costly state-managed programs like the one in Illinois, the administration should support efforts like the one passed this year in Washington state, where legislators worked cooperatively with the private sector to create a new retirement marketplace subject to ERISA’s worker protections.

This new public-private partnership, supported by a diverse group of industry and advocates including ACLI and AARP, is a better state-based approach. It will use the strengths of the existing private retirement system to help small employers find and set up cost-affordable plans, including the federal myRA program.

The marketplace will offer a wide assortment of private retirement plan options available to employers on a voluntary basis, and annual fees charged to enrollees will be limited to 100 basis points (one percent of assets). The marketplace will also provide educational and federal tax incentive information.

Workplace retirement savings plans, such as 401(k)s, are widely available today. Nearly 80 percent of American full-time workers have access to workplace retirement plans and more than 80 percent of those with access to plans participate.

That still leaves some workers who don’t participate, often because they work part-time or they work for a smaller firm that doesn’t offer a plan. ACLI looks forward to working with the administration and legislators in the states and Congress on ways to utilize the existing private retirement system and make it easier for more small businesses and their employees to access private retirement plans, save for retirement and receive the ERISA protections they deserve.

The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with approximately 300 member companies operating in the United States and abroad. ACLI advocates in federal, state, and international forums for public policy that supports the industry marketplace and the 75 million American families that rely on life insurers’ products for financial and retirement security. ACLI members offer life insurance, annuities, retirement plans, long-term care and disability income insurance, and reinsurance, representing more than 90 percent of industry assets and premiums. Learn more at www.acli.com.