U.S. Senate votes to block California-led effort on retirement security for low-income workers

From today’s LA Times by Evan Halper

A pioneering, California-led effort to create retirement security for low-income workers has been thrown into jeopardy after the U.S. Senate voted Wednesday to block states from starting programs to automatically enroll millions of people in IRA-type savings plans.

The measure, aimed at stopping the fledgling state retirement programs, now goes to President Trump, who has vowed to sign it.

That leaves lawmakers in California, Illinois and other states who only months ago were celebrating the success of their long-planned initiative scrambling to regroup. The Senate voted 50 to 49 to stop the state plans.

The retirement programs that were about to launch in seven states and are under consideration in many more were targeted by Wall Street firms and the U.S. Chamber of Commerce.

The vote reflected the renewed influence of the business lobby in Washington since the 2016 election, with lawmakers defying the 38-million member AARP, a vocal supporter of the auto-IRA program. The seniors group had warned senators that its members would hold them accountable for their votes.

“Nobody had a problem with this except for the big Wall Street companies who invented in their mind that they would be losing business to these state innovations,” said Sen. Christopher S. Murphy (D-Conn.), whose state was moving to implement an auto-IRA program. “This is a terrible, terrible thing we are doing,” he said of the Senate’s vote to undermine the state programs.

The California Secure Choice program and similar retirement laws generally require employers with no retirement plans to automatically invest a small percentage of each worker’s pay in a state-sponsored retirement account. Employers can opt out of the program if they choose.

The money is managed by private investment firms that partner with the states. The accounts are intended to help build financial security for some 55 million workers nationwide whose employers do not offer a retirement plan.

The push to implement the programs was delayed for years by complicated federal Labor Department rules governing such investment pools. In its final months, the Obama administration gave states the green light to pursue their vision. But Congress has now voted to revoke that authority, leaving the programs in limbo. Opponents of the state programs say they became too risky for consumers after the federal rules were changed.

Read the entire article here.