Congress must resist attacks on state retirement savings plans

Even as traditional pensions have all but disappeared from the employment landscape, only about half of the workforce has opened a 401(k)-type account that was intended to take up the slack. Many employers don’t offer access to these accounts or, even if they do, millions of their employees don’t participate.

Regardless of what’s done in the future with Social Security (and I believe benefits should increase), everyone must be able to supplement these foundational resources to avoid post-work lives undermined by economic insecurity.

This reality — and the need for a policy response — has been clear for years, if not decades. Unfortunately, partisanship in Congress has prevailed over coherent and effective social policy. Proposals to extend broad access to retirement accounts were never acted upon, as Republicans opted to oppose policy ideas advanced by President Obama’s team regardless of their merit.

With no prospects for federal action, a number of states have actively stepped into the void, exploring how to automatically enroll every worker into a savings plan if they currently don’t have an account. Five states — California, Connecticut, Illinois, Maryland and Oregon — have already created Secure Choice Retirement Savings programs for their private-sector workforce.

While the details may differ, each program facilitates account opening, payroll deductions and opt-outs for those who don’t wish to participate. The lift for employers is limited to an easy adjustment to payroll. There are no required contributions.

Additional states and municipalities are also considering similar measures. Policymakers at these levels of government have dug in and followed the research that confirms the necessity of making savings easy and automatic.

As a matter of principle and policy, everyone should be able to save for retirement, no matter where you work or how much you make.

Yet the work of actually designing these savings plans is complicated by regulations at different levels of government. It’s the beauty and bane of our federalist system.

{mosads}To avoid needless litigation and legal challenges, the U.S. Department of Labor (DOL) issued guidance this past summer to clarify how states could implement this approach and not run afoul of existing federal rules that govern payroll deposits into retirement plans. These rules are now under attack by an emboldened Republican Congress.

The plan is to use an obscure legislative loophole to rollback the DOL rules and create new obstacles for the states to navigate. The partisan U.S. Chamber of Commerce is supporting them, along with a coalition of Wall Street firms, under the guise of the Financial Services Institute and Investment Company Institute.

They like the status quo, even if it leaves some 40 million households without any resources beyond Social Security.

Simply put, Republican leaders in Congress are invoking an arcane parliamentary maneuver in attempts to nullify the work of the last administration. The Congressional Review Act does give Congress the authority to scrap agency regulations within 60 legislative days, and do so without a public hearing.

But the law was intended to address ill-conceived agency rules. In its 20-year history, the law has only been used once — to pull back a confusing set of workplace rules related to ergonomics. It was not intended to be a partisan tool.

This is an overreach, and an abuse of Congressional power.

This is the same procedure Republicans are using in an attempt to roll back the fiduciary rule, which is the commonsense policy to ensure anyone giving paid financial advice has to prioritize their clients’ interests over an undisclosed third party who may be paying to promote specific financial products. It seems like a fairly basic protection consumers should expect in the financial services marketplace.

The argument against this rule is that the financial firms don’t like it and the Obama administration was behind it. House Republicans have already acted (in a party-line vote) and signed off on this subterfuge to eliminate the fiduciary rule and thwart states as they plan to implement their Secure Choice programs.

It is an atrocious way to govern and it is up to the Senate to resist.

Congress should respect the right of states to develop their own innovative programs.

If there are valid concerns about these policies, the Senate should hold hearings, permit public testimony and pursue a federal solution.

But if they instead decide to go through with this power play amidst the confusion sown by the new administration, the public response should be “not so fast.” Congress should be expected to do its job and ensure that American workers have options to save for their future and that they are protected from financial scams.

Both the fiduciary rule and the right of states to pursue their own Secure Choice savings plans deserve protection. They should not be casualties of chaos.

Reid Cramer is a senior fellow at New America, a nonpartisan think tank based in Washington. He is the director of New America’s Asset Building Program, which aims to promote policies and ideas that significantly broaden access to economic resources through increased savings and asset ownership, especially among lower-income families.

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