The Labor Department has extended the safe harbor for state-run retirement plans to qualifying cites and counties.

The amended rule means that some cities and counties will be able to require businesses that don’t provide a workplace retirement savings program to enroll workers in a government-administered IRA.

In order to qualify, a city or county must have a population at least as large as the population of the least populous state, which is currently Wyoming. Census Bureau data from 2014 puts the population of Wyoming at 584,153.

And a city or county cannot run its own plan if it is in a state that already has a mandate for participation in a state-run plan.

To date, California, Illinois, Oregon, Connecticut and Maryland have passed legislation that will require private-sector businesses that don’t offer a plan to enroll employees in a state-administered savings vehicle.

A safe harbor published by the Labor Department in August of this year says the government-run plans will be exempt from the Employee Retirement Income Security Act if certain conditions are met.

Employers will not be allowed to contribute to the programs; employers’ requirements will be limited to administrative responsibilities such as providing payroll information; and employees must be given the option to opt-out of the savings plan.

The conditions that apply to cities and counties will be same as those for state-run plans, according to Labor Department fact sheet.

Census Bureau data shows there are 31 cities that meet the population requirement. More than 100 counties meet the population threshold.

The final rule also says a city or county must have “implicit or explicit” authorization from its state to create a program requiring employer participation.

When factoring for the three criteria, the Labor Department says there are 88 cities or counties that qualify.

The Agency said it is unclear how many so-called “political subdivisions” will create a program. New York, Seattle and Philadelphia have either expressed interest or initiated a proposal process.

In Washington State, a retirement plan exchange was created by law, but it does not mandate employer participation, and therefore would not prevent Seattle from creating a program at the city level.

“We have said many times that there is no silver bullet when it comes to solving the retirement savings issues facing workers and our nation. Increasing access to savings opportunities, improving transparency and reducing conflicts of interest in investment advice are all critically important policy tools that this administration has pursued,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi, in a statement.

“We hope that today’s rule increasing access to savings opportunities will add to the tools available for working people who want to save for retirement,” she added.

Instant Insights /

DOL finalizes rule for city, county retirement plans

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