Legislation introduced by Senate Democrats would revive a Labor Department safe harbor that gave states and cities wider latitude to mandate participation in retirement plans.

The Preserve Rights of States and Political Subdivisions to Encourage Retirement Savings, or PROSPERS Act, would amend the Employee Retirement Income Security Act in the same way an Obama-era safe harbor did. States would be allowed to mandate employers that don’t offer a workplace retirement plan to automatically enroll workers in savings program.

Two weeks ago, the Senate narrowly passed a resolution to roll back the safe harbor for state administered plans.

Sen. Martin Heinrich, D-NM, and Sen. Chris Murphy, D-CT, introduced the Prospers Act immediately after the resolution passed. Senators Ben Cardin, D-MD, Ron Wyden, D-OR, and Patty Murray, D-WA—each prominent lawmakers on retirement policy—are among 16 Democrat co-sponsors.

Two Republicans, Sen. Bob Corker of Tennessee and Sen. Todd Young of Indiana, broke from their party and voted to keep the safe harbor in place. Several Republicans were reportedly on the fence in the weeks leading up to the vote, which passed by a 50 to 49 margin. Sen. Marco Rubio, R-FL, cast the 49^th vote in favor of the resolution. Some have speculated that his delayed vote is an indication that he too was considering voting to the keep the safe harbor in place.

Sen. Dick Durbin, D-IL, was convalescing from surgery and did not vote. Durbin is a co-sponsor of the PROSPERS Act, and undoubtedly would have cast a vote supporting the safe harbor that would have resulted in a 50-50 tie. Vice President Mike Pence would have then been forced to cast the deciding vote. In Congress, Pence was a forceful advocate for states' rights. Some industry insiders have speculated that Pence would be a natural supporter of the safe harbor for state retirement plans.

The Prospers Act is unlikely to be considered in the House of Representatives, where the resolution to roll back the safe harbor passed by 231 to 193, with three Republicans voting to preserve the safe harbor, and one Democrat voting to kill it.

The resolution to undo the Obama-era safe harbor was brought under the Congressional Review Act, which only requires a simple majority in the Senate to roll back regulatory actions.

The Prospers Act would require a majority in the House and 60 votes in the Senate to pass, as well as a signature from President Trump, all thresholds that are unlikely to be reached in the current political landscape.

But in introducing the bill, Senate Democrats have made state-mandated participation in retirement savings plans a de facto legislative objective for the party going forward.

Republican and industry opponents of the safe harbor argued it would deprive retirement investors of ERISA’s fiduciary protections. Supporters of the rule claimed that argument was a red herring, and that the true objective behind rolling back the safe harbor was preserving industry’s share of the retirement plan marketplace.

Under the safe harbor, and under the Prospers Act, employers would have limited roles in the state-administered plans, and they would not be subject to ERISA’s fiduciary requirements on employer plan sponsors in the private market.

But even without the safe harbor, states that already have legislation in place are pledging to move forward with initiatives to mandate participation in retirement plans.

In Oregon, a pilot program is slated for rollout this July. In California, where a law was passed requiring participation for employers with as few as five workers, the mandate will begin for large employers that don’t currently offer a plan in 2019, and will be phased in over three years.

In Illinois, employers with at least 25 workers will be required to offer a workplace retirement plan or participate in the state plan. Its program is scheduled for a 2018 rollout for larger employers, and phased-in implementation for smaller employers over the ensuing two years.

After the Senate voted to roll back the safe harbor, Sen. Heinrich said, “Republicans voted to take away opportunities for Americans to save their own money for retirement.”

On introducing the Prospers Act, he said, “our legislation will make saving for retirement easier by providing workers with a simple way to put money away each month and easing the burden of participation and compliance on small businesses.”

Instant Insights /

Senate Dems put state safe harbor for retirement plans into new legislation

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