Republicans in the Senate are struggling to secure the votes needed to roll back a Labor Department regulation that would make it easier for states to mandate enrollment in state-administered retirement plans, according to several sources.

The House of Representatives passed a resolution under the Congressional Review Act that blocks the safe harbor from being implemented, largely along party lines.

But the measure has stalled in the upper chamber. Last month, the Senate passed a separate resolution that blocked a similar safe harbor extended to some municipalities by a 50 to 49 margin. Sen. Bob Corker, R-TN, broke from Republicans and voted with Democrats to uphold the safe harbor. “I do not think the federal government should stand in the way of states seeking to solve very real problems, especially in the midst of a growing retirement security crisis,” Corker said in a statement.

Corker’s position underscores a critical dynamic of the debate on state-run retirement plans. Under the safe harbor, states can require participation for employers that don’t sponsor a savings plan. Employers would not be allowed to contribute to the savings plans and would have limited administrative responsibilities beyond facilitating enrollment. The plans would not be regulated under the Employee Retirement Income Security Act, a provision designed to relieve employers of potential fiduciary liability. Workers would be able to opt out of the savings plans after being automatically enrolled.

Republican opponents of the safe harbor characterize it as regulatory loophole, and argue state-run plans will deprive savers of fiduciary protections because they won’t have to comply with ERISA.

But the federalist principal of returning power to states is a fundamental tenet of the Republican party. The safe harbor was written at the behest of President Obama after failed efforts to create a federally administered universal savings requirement. Each Obama budget included money for a federal option. But the idea received little, if any, attention on Capitol Hill.

“At the federal level, we do not have a dance partner,” said former Labor Secretary Thomas Perez when the safe harbor was released last August. “Republicans want to promote the status quo. The cost of doing nothing is significant, and that’s not good for retirees, and puts additional burdens on tax payers.”

Under the Congressional Review Act, Republicans will only need a simple majority to roll back the safe harbor. But they are also limited by the law’s time restriction, which requires a vote by May 9.

Several Republican Senators are reportedly leery of voting down a rule that would give states greater authority to address retirement savings shortfalls.

“There are no definites, but we are hearing that a number of Republicans have said they don’t want to have to go to the floor and vote against a state initiative,” said Cathie Eitelberg, the public sector market director for The Segal Group.

One real possibility is that Republicans on the fence will ask party leaders to not bring the resolution to the Senate floor for a vote, said Eitelberg.

States will have to foot the bill for poor retirees

Proponents of the safe harbor say the country’s drastic retirement savings shortfall requires states to take immediate and aggressive action. Upwards of 55 million Americans don’t have access to retirement savings plans through the workplace.

A study recently produced by The Segal Group shows that state by state, about half of fulltime workers are saving nothing for retirement, meaning they will have to rely solely on Social Security after leaving the workforce.

In one hypothetical case, a person earning $56,000 a year will see their retirement income drop below the qualifying amount for Medicaid and other state-funded social welfare programs. Segal’s study estimates that states would collectively save $5 billion over 10 years by modestly improving savings rates through state plans.

“When you consider improved savings rates for younger workers, you are talking about significantly reducing the cost of social welfare programs in the future,” said Rocky Joyner, vice president and actuary at The Segal Group.

Republican state treasurers influencing debate

The implication of retirement savings shortfalls on state budgets has motivated state treasurers to enter the debate. In a recent letter to lawmakers, 15 treasures, including seven from states that voted Republican in the last Presidential election, urged Republican leaders to vote no on the resolution.

“We insist that states be allowed to maintain their constitutional rights to implement such legislation,” the treasurers said in the letter.

David Damschen, Utah’s Republican State Treasurer, is a self-described conservative. He’s led the movement of state treasurers calling for Republicans to support the safe harbor.

“As a conservative, it’s fair to ask the question ‘what on earth is the government doing here?’ But the scale of this problem is so large that it requires an all-hands-on-deck solution,” Damschen told BenefitsPRO.

Damschen worked in banking for 20 years, where he consulted on private sector pension and defined contribution options. “There are a lot of great retirement products and solutions in the marketplace. But people aren’t using them. We know that when people have access to a plan through the workplace they are 15 times more likely to save for retirement.”

The issue ultimately boils down to a 10^th Amendment constitutional argument, which protects states' rights, thinks Damschen. In Utah, 500,000 private sector workers don’t have access to a savings plan through their employers. Damschen doesn’t expect his state will pass a law mandating participation, but is more likely to implement a marketplace clearinghouse employers can use to choose retirement plans. Utah does sponsor a 529 college savings plan, which Damschen says is proof that a private-public partnership can be functional.

Sen. Orin Hatch, R-UT, is the sponsor of the resolution to roll back the safe harbor — it is safe to say he won’t vote against his own piece of legislation.

But other Senate Republicans clearly are concerned with the constitutional issues at play, and have more than likely been influenced by Damschen and other conservative state treasurers’ role in the debate.

“What’s more conservative than empowering individuals to take care of themselves and not be dependent on government when they retire?” asks Damschen, who downplayed the influence he has personally had on the debate. He’s reluctant to handicap an outcome on the vote or if the resolution will ultimately be brought to floor.

“We’re hoping for the best,” said Damschen.

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