Blog

Contact Us for More Information

Senate Overturns Rules to Help Cities Offer Retirement Plans to Workers

Posted by Corey F. Schechter | Apr 24, 2017 | 0 Comments

Contributing Author: Dianne L. Schechter, Paralegal

The Senate recently voted to roll back an Obama-era rule that would make it easier for major cities to launch city-sponsored retirement plans.

A measure approved 50 to 49 would scale back a Labor Department rule finalized last year that clears hurdles for large cities seeking to launch retirement plans for people who don't have access to such plans through their jobs.

The resolution needed President Trump's signature to take effect, which was provided by the President on April 13, 2017, when he signed H.J. Res. 67 into law.

The Senate will vote on a similar measure that could make it more difficult for states to create retirement plans. (While the rules affecting states and cities are similar, Congress needs to vote on each separately.)

The Labor Department rules were designed to make it easier for states and cities by exempting them from the Employee Retirement Income Security Act (ERISA), which governs most workplace retirement plans and pensions.

But the efforts from state and local governments are facing resistance from Republicans and business groups, which argue the government shouldn't be creating retirement plans. Some critics say they local plans may discourage some employers from offering their own retirement programs. Importantly in that respect, the proposed city- and state-sponsored plans would be treated similarly to IRAs which allow for significantly lower annual contribution than employer-sponsored plans such as 401(k) plans.

Supporters of the approach say local efforts may help eliminate one of the biggest obstacles workers face when it comes to saving for retirement: access to a savings plan. About 55 million Americans don't have retirement accounts or pensions at work, according to AARP, which supports the measure.

The programs would aim to take the hassle out of saving for retirement by automatically enrolling people in individual retirement accounts. Workers would also have the contributions deducted directly from their paychecks. People who don't want to participate would be able to opt out.

Some of the cities considering launching retirement programs, such as New York, Philadelphia, and Seattle, may halt their efforts without the Labor Department rule.

When New York unveiled its proposal in October, the city estimated it would affect 1.5 million New Yorkers — or nearly 60 percent of the city's private-sector workers.

Over the next several weeks, the Senate could take up the resolution that would undo the rule affecting state plans. At least seven states — California, Oregon, Illinois, Maryland, Connecticut, New Jersey, and Washington — are in the process of creating state-run retirement plans. More than 20 other states have expressed interest, according to AARP.

Officials from some states, including Oregon and Maryland, say they may be able to proceed with their retirement programs even without the Labor Department rule. But the lack of clarity could cause some states to think twice before launching programs.

Continue following our blog page for updates in this interesting legal development of pension laws affecting millions of American workers.

About the Author

Corey F. Schechter

Corey Schechter practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Employment and Labor Law.

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Retirement Plans

We help establish a customized plan that meets regulatory requirements as a tax qualified plan. Following implementation, our attorneys can assist clients and their plan administrator with regular reviews and updates to help with regulatory compliance for the plan's operation, and continued effectiveness in meeting the client's specific goals.

ESOPs

We are dedicated to employee ownership. When you come to us for ESOP services, you receive influential legal counsel who stand beside you to help you stay informed, in compliance, and abreast of the latest developments-all to help you realize your plan goals as fully and effectively as possible.

QDROs

A QDRO is a specially designed court order that is required for the division of retirement benefits in a family law case. Many family law attorneys do not possess the expertise necessary to divide retirement benefits or stock options upon divorce. We have extensive experience in dividing qualified plans, government plans, IRAs and stock options between the employee spouse and non-employee spouse.

Butterfield Schechter LLP provides the information in this website as a service to its clients and visitors to the site. This website is for information purposes only and is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The information in this website is provided "as is," and while the information in this website is updated periodically, additional facts or future developments may affect subjects contained herein, and no guarantee is given that the information provided is correct, complete, or up-to-date. Seek the advice of professional counsel before acting or relying upon any article, form, or information in this web site. To ensure compliance with the requirements imposed by the United States Treasury and the Internal Revenue Service, we inform you that any federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of: (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing, or recommending to another person any transaction or matter addressed herein. Butterfield Schechter LLP has endeavored to comply with all known legal and ethical requirements in compiling this website. In the event that this communication does not conform with any laws or regulations of any state or country in which it may be received, Butterfield Schechter LLP will not accept legal representation based on this communication from a person in such a state or country. Electronic mail is provided as a convenience in communicating with the attorneys at Butterfield Schechter LLP. Contact by e-mail does not alone create an attorney-client relationship. Please remember Internet e-mail is not secure and messages sent to the firm or any of its employees or attorneys should not contain sensitive or confidential information. Thank you for visiting our site.

Menu