November 19, 2015

Guidance on State Savings Programs for Private Sector Employees

On November 16, 2015, the Department of Labor (DOL) published guidance to support the efforts of states in promoting broader access to retirement savings opportunities for private sector employees in the form of a proposed regulation and an Interpretive Bulletin.

The proposed regulation provides a safe harbor from preemption by the Employee Retirement Income Security Act (ERISA) for state laws that require certain employers to facilitate employee enrollment in a payroll deduction individual retirement account (IRA). The safe harbor requires that such programs be established by and administered under state law. For state programs that mandate auto-enrollment, the safe harbor requires that employees be allowed to opt out of payroll deductions and that employers not exercise any discretionary authority over the operation of the program. The proposed regulation, although not yet effective, clarifies compliance issues for several state programs currently under consideration that would enroll private sector workers in payroll deduction IRAs.

The Interpretive Bulletin assists states interested in helping employers establish ERISA-covered plans for their employees under three specific approaches. The first approach allows a state to establish a marketplace to connect employers with retirement plans offered in the private sector market that have been determined by the state to be suited to small employers. The second approach allows a state to establish a “prototype” plan design that individual employers could adopt and offer to employees. The third approach allows a state to establish a multiple employer plan that employers could join and that is established and maintained under state law. The Interpretive Bulletin indicates that, under these three approaches, the state law establishing the plan would not be preempted by ERISA, provided that employer participation was voluntary. The Interpretive Bulletin, which was effective November 18, 2015, mirrors the types of plans already established in various states.

A fact sheet on state savings programs for non-government employees is on the Department of Labor website.

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