According to CNN Money, about 55 million Americans don't currently have a retirement plan through their employer.

As many as 30 states have taken at least exploratory steps to establish a required retirement plan, while eight already have plans in place. However, Congress could halt these plans in their tracks.

These state-sponsored plans are aimed at helping small business employees who don’t have access to a retirement savings plan. Though the House voted to roll back the Obama-era rule that opened doors for these plans, officials in California, Illinois and Oregon are vowing to still move forward.

The Labor Department rule was a safe harbor that facilitated a states’ ability to mandate participation in retirement plans. State-sponsored plans would be exempt from having to comply with the Employee Retirement Income Security Act (ERISA). ERISA sets minimum standards for retirement plan providers regarding consumer protections.

The finalized safe harbor came in August of 2016, where the Labor Department said states could require employers that don’t offer a voluntary workplace retirement plan to auto-enroll their employees in a state-administered IRA. To satisfy the safe harbor under ERISA, states would have to allow workers to opt-out of the plan.

Concerns / Proponents

Concerns expressed in front of the Senate were that the safe harbor would deprive participants of the state plans of ERISA’s consumer protections. Another concern mentioned was that state plans would have a competitive advantage against private sector retirement plan providers.

On the other hand, proponents of the safe harbor said that state plans are a fiscal necessity. Otherwise, millions of retirees who are leaving the workforce with little savings will eventually fall to social welfare programs – funded at the state level.

According to Benefits PRO, a safe harbor for employer-provided IRAs that use payroll deductions already exists under ERISA, but it requires that employee participation be voluntary. The difference between that one, and the one issued in August, resides around automatic enrollment.

Note for employers

Nothing has been determined at this point. States are still planning to move forward (albeit more cautiously) with retirement plans.

However Congress decides to take action, PrimePay already has the solutions in place and will evolve accordingly. To learn more about our EZ IRA solution, email pwhite@primepay.com.