As time is running out for the U.S. Senate to roll back a LaborDepartment safe harbor for state-run retirement plans, small employers inone state remain largely in the dark about what new regulationswill mean for their businesses.

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LIMRA Secure Retirement Institute held a series of focus groupswith small business owners in Connecticut, where a law was passedin 2016 requiring employers with at least five employees to offer aprivate sector retirement plan, or enroll workers in a new auto IRAprogram run at the state level.

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Related: The conservative roots of state-sponsoredretirement plans

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Only a small number of participants in the focus group, whichincluded owners or decision makers in businesses that do not offera private sector plan, knew much about Connecticut’s new option,according to LIMRA’s findings. And misconceptions were common amongthose that claimed familiarity with the plan.

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Connecticut’s law effectively creates a retirement planrequirement for small business owners, who can offer the stateoption alongside a privately administered plan. Employers that dooffer a plan will be allowed to drop it in favor of the state option, which will include a target-datefund, a prohibition on employer contributions to IRAs, and requirea minimum of 50 percent of total assets to be invested in alifetime income option at retirement.

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The Labor Department’s safe harbor will allow states likeConnecticut to operate plans outside of the Employee RetirementIncome Security Act’s requirements, meaning employers thatparticipate in the program will not be considered fiduciaries.

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That distinction bothers opponents of the safe harbor, who callit a regulatory loophole that will deprive retirement investors ofERISA’s consumer protections.

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Opponents also argue the state plans will encourage smallemployers that offer 401(k) plans to drop them and instead moveworkers to state-run options. And employers with employees indifferent states will face the burden of complying with more thanone state law, as measures already adopted in Connecticut and otherstates are designed differently.

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The Senate is expected to consider a resolution of disapprovalfor the safe harbor this week, or next week at the latest. Underthe Congressional Review Act, only a simple majority will be neededto kill the safe harbor, but Congress has a time limit to use theCRA to roll back newly issued regulations.

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Last week, a consortium of employer and investment industryadvocates, including the Chamber of Commerce, the InvestmentCompany Institute, and the American Benefits Council, sent a letterto each member of the Senate, urging that the safe harbor be rolledback. Sen. Bob Corker, R-TN, has said he will vote to keep the safeharbor in place. Several other Republican senators reportedly haveconcerns that rolling back the safe harbor will infringe on states’rights.

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In California, officials have said they intend to go ahead withits state retirement initiative no matter the fate of the safeharbor.

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In Connecticut, where lawmakers are facing a $2.2 billionrevenue shortfall, the state will clearly have to invest in furtheroutreach to small business owners if it plans to enact its newretirement plan by 2018, when it is slated for official rollout,says Catherine Theroux, LIMRA’s director of public relations.

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“The employers that knew anything about the law knew verylittle,” Theroux said of LIMRA’s focus groups with small employers.“That’s the one clear take away—a lot more needs to be donecommunicating what the program is, how it would work, and whatemployers would be responsible for.”

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LIMRA’s agnostic report shows that a “significant minority” ofemployers had not even heard of the plan. Upon learning itsparameters, reaction ranged from those that strongly favoredstate-run plans to those strongly against the law.

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Those that favored the plan acknowledged a retirement crisis,and said they favored the state stepping in to offer a benefit thathas previously been too expensive for small employers to offer.

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Those against the law said they were leery of Connecticut’sability to properly manage the program, and conflated the newauto-IRA retirement plan with the state’s well-publicizedunderfunding of the State Employees Retirement System pension,which by some measures is only funded at 36 percent ofliabilities.

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Some employers were dubious of a new government mandate, andexpressed concerns over the cost they would bear to deductcontributions from payroll.

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LIMRA’s report found that the employers, on balance, areunfamiliar with the positive correlation between payroll deductionsand employees’ savings rates seen with private sector definedcontribution plans.

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That fact can be chalked up to a lack of experience in offeringsavings plans, says Theroux.

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“These people are running restaurants, or salons, or lawnmaintenance companies—many of them are just worried about makingpayroll,” she said. “Retirement savings programs have not been ontheir radar. The differences between defined contribution anddefined benefit, and the nuance of the complicated nature of oneversus the other is not something they fully understand.”

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LIMRA’s evidence also shows confusion among small employers overthe role of annuities in Connecticut’s state plan; some questionedwhether requiring 50 percent of assets in lifetime income optionsat retirement was too high.

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But on balance, many employers were warm to the overallobjective of the plan, once it was explained.

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“In general, business owners do seem to like most aspects of itsdesign. Still, some have objections, most notably not trusting theState of Connecticut,” the report concluded.

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