October 1, 2015

GAO Recommends Congressional and Agency Actions to Facilitate State Pension Coverage for Private-Sector Workers

The momentum for allowing states to pass laws addressing pension coverage for private-sector workers continues to grow. On September 29, the U.S. General Accountability Office (GAO) issued a report making recommendations for how the Congress, the Department of Labor (DOL) and the Department of the Treasury (Treasury) could aid such efforts. The report is a response to a request from Senator Patty Murray (Ranking Member of the Committee on Health, Education, Labor and Pensions) for the GAO to study issues related to efforts to expand pension coverage.

The GAO recommended that Congress should provide states limited flexibility to pursue efforts to expand coverage, possibly including authorizing the DOL, in consultation with Treasury, to provide a limited safe harbor from preemption of such state programs by the Employee Retirement Income Security Act (ERISA) or to select a limited number of states for pilot projects. The GAO also recommended that the DOL and Treasury revise their regulations to clarify whether states can set up programs using payroll deduction individual retirement accounts (IRAs) and, if so, whether employer establishment of such IRAs could be required (without the IRAs becoming subject to ERISA).

The DOL has already sent to the Office of Management and Budget for clearance a draft proposed regulation addressing how states can establish payroll IRA arrangements that avoid ERISA preemption. The DOL proposed regulation is expected to be issued before the end of the year.

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