Congress Moves to Roll Back Safe Harbor for Municipal, County Auto-IRA Plans
The U.S. Senate has passed, by a vote of 50-49, a Congressional Review Act resolution that would block the Obama-era Department of Labor’s (DOL) rule that defined the terms under which cities and counties could create IRA plans that automatically enroll private-sector workers whose employers do not offer a retirement plan. President Trump is expected to sign it.
The DOL’s rules to create a safe harbor exempting states’ and municipalities’ auto-IRA programs from ERISA are squarely in the crosshairs of Congress under a law called the Congressional Review Act (CRA).
Under the CRA, Congress has a window of time to consider and pass legislation to overturn any significant regulation if that legislation is signed by the president. Generally, that is an extremely high threshold, since presidents support their administrations’ rulemaking authority in nearly every case. But when a new president (particularly one from the opposite political party) takes office, and Congress, particularly when in control of that new president’s party, is so inclined, the CRA can become — for a certain amount of time at least — an effective tool to undo what has been recently done with just a simple majority vote, and isn’t subject to a filibuster in the Senate.
The current CRA window applies to any significant Obama-era rule that was either finalized or made effective after June 13, 2016. If the current Congress wants to undo those — and they need to undo each rule individually — they have until sometime toward the end of May 2017 to act (the exact timing depends on the amount of days Congress is in session). So far, this Congress has used the CRA to erase 11 Obama-era rules from various departments and agencies.
The DOL’s state plan rule was finalized in August 2016 and became effective in October 2016. The DOL’s city and county plan rule was finalized in December 2016 and became effective in January 2017. So both DOL rules are subject to the current CRA window.
The House of Representatives took action to nullify both rules in February 2017, passing both the state plan CRA and local plan CRA
(H.J. Res 67
) on nearly straight line party votes. Earlier this month Senate Finance Committee Chairman Orrin Hatch (R-Utah) introduced two resolutions
, S.J.Res. 32 and S.J.Res. 33, to undo the regulations published in the waning days of the Obama administration.
On a potentially larger, and more controversial issue, the Senate has yet to schedule a vote on the state-run plan rule. This could be an indication that Senate Majority Leader Mitch McConnell (R-KY) does not yet have the votes for the state plan CRA to pass the Senate. In the meantime, the CRA window to undo Obama-era rules — at least the ones that have not been already erased — continues to close.
Of course, even if that vote occurs and the state-run retirement safe harbors are “unwritten,” that won’t necessarily undo the work that has been done, or stop the state-run initiatives underway — though it would potentially undermine the clarity and encouragement that the Obama administration had sought to provide these programs. Indeed, several of the programs under development have already announced their determination to forge ahead, regardless.
Andrew Remo is the American Retirement Association’s Director of Legislative Affairs.