Until this question of fiduciary accountability is definitively answered, state-run retirement plans will continue to present a risk to both employers and employees.

The biggest threat posed by state-run retirement plans to retirement savers was the lack of ERISA protection. In order to reduce costs to the states seeking to run these plans, the late Obama administration unilaterally decided to exempt state-run retirement plans for private employees from ERISA regulations. ERISA, as written, specifically exempted municipal retirement plans covering public employees. Nothing in the law removed ERISA protection for private employees.

Fortunately, Trump, the House, and the Senate, in one of the few actions they’ve been able to act in unison on, saw this danger and reinstated ERISA safeguards to these nascent plans.

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