Two pieces of legislation that would roll back Labor Departmentsafe harbors for state and municipal-sponsored retirement planshave passed the House of Representatives, largelyalong party lines.

Last August, the Labor Department finalized a safe harbor thatfacilitates state-sponsored retirement plans for privatesector businesses that don’t offer a workplace retirement savingsoption. The Labor Department estimates that 39 million Americansdon’t have access to a retirement savings option through theworkplace.

Last December, the DOL finalized another safe harbor that allows cities andcounties with populations of at least 600,000 to sponsorretirement plans, so long as those municipalities are not locatedin states that sponsor a retirement plan.

Under the safe harbors, states and qualifying municipalities areallowed to mandate participation in retirement plans.

Some states have already created state-sponsored plans

In September 2016, California Gov. Jerry Brown signed theSecure Choice Act into law. If that law stands,it ultimately will require all employers with at least fiveemployees that don’t sponsor a retirement plan to enroll workers inan IRA administered by the state. Workers will be automaticallyenrolled, and 3 percent of salaries will be defaulted into theaccounts. The rule is scheduled to be phased in by 2018, startingwith larger employers with 100 workers.

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In addition to California, Connecticut, Illinois, Maryland, andOregon have already passed legislation requiring participation instate-sponsored IRA savings plans. Upwards of 20 other states areconsidering comparable legislation. The State of Washington haspassed a law creating a state-sponsored savings option, but it doesnot mandate participation, meaning the city of Seattle would beallowed to sponsor a retirement plan.

Plans that qualify under the safe harbor will not be required tocomply with the Employee Retirement Income Security Act, whichholds all private-sector employer retirement plan sponsors asfiduciaries, and creates consumer protections for participants in401(k) and defined benefit pension plans.

In order to qualify for the safe harbor, states canautomatically enroll workers into IRAs, but the laws must includean opt-out provision. Also, employers cannot contribute to thesavings accounts, and are limited to administrative roles, whichinclude facilitating payroll deductions and distributing educationmaterials.

The safe harbors are designed to free employers that participatein state and locally sponsored retirement plans from liabilityunder ERISA, which allows participants in 401(k) plans to sue theiremployers if savings are not managed in the best interests ofworkers.

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Budget proposals under the Obama administration includedprovisions for a federally sponsored retirement program to fill thegap for the millions of Americans without access to workplacesavings plan, but that idea never gained traction on CapitolHill.

In the summer of 2015, President Obama instructed the LaborDepartment to craft regulations that would facilitate efforts atthe state level to sponsor retirement plans.

Safe Harbors stand a good chance of getting killed

The two resolutions that would roll back the safe harbors wereintroduced last week by Republican members of the Housesubcommittee on Health, Employment, Labor, and Pensions.

All but three Republicans in the House voted for theresolutions, which were brought under the Congressional Review Act.Only one Democrat voted for the resolutions.

Under the CRA, Congress can block recently issued regulationswith majority votes, meaning only 51 votes will be needed to blockthe safe harbors in the Senate, where Republicans hold 52seats.

Only one regulation has been overturned under the CRA since itspassage in 1996, according to the Congressional Review Service.

But the law is expected to be used much more actively under theTrump administration’s pledge to roll back Obama-eraregulations.

Critics of the safe harbors argue they erode the preemptivepower of ERISA, a federal statute, and will ultimately underminethe retirement savers’ consumer protections in that law.

The Investment Company Institute, which represents the interestsof mutual fund companies and has been one outspoken critic, hasargued that state-run retirement plans could ultimately leavetaxpayers on the hook for funding shortfalls.

“ICI research has demonstrated that the programs developed underthe DOL’s new rules rely on shaky economic foundations, making theconsumer protections mandated by ERISA all the more necessary,”said ICI president and CEO Paul Schott Stevens in a statement whenthe resolutions were introduced last week.

The AARP is among the organizations that have lobbied forstate-run retirement plans.

On the House floor before the vote, Rep. Tim Walberg, R-MI,sponsor of one of the resolutions and chair of the House HELPsubcommittee, said the safe harbors are loopholes that will putretirees and taxpayers “at risk.”

Rep. Nancy Pelosi, D-CA, minority leader in the House, arguedthat Republicans were doing the bidding of Wall Street interests intrying to rescind the safe harbors.