(a) Scope. This document sets forth the views of the Department of Labor (Department) concerning the application of the Employee Retirement Income Security Act of 1974 (ERISA) to certain state laws designed to expand the retirement savings options available to private sector workers through ERISA-covered retirement plans. Concern over adverse social and economic consequences of inadequate retirement savings levels has prompted several states to adopt or consider legislation to address this problem.1 An impediment to state adoption of such measures is uncertainty about the effect of ERISA's broad preemption of state laws that "relate to" private sector employee benefit plans. In the Department's view, ERISA preemption principles leave room for states to sponsor or facilitate ERISA-based retirement savings options for private sector employees, provided employers participate voluntarily and ERISA's requirements, liability provisions, and remedies fully apply to the state programs.
1For information on the
problem of inadequate retirement savings, see the May 2015
Report of the United States Government Accountability Office (GAO), RETIREMENT
SECURITY-Most Households Approaching Retirement Have Low Savings (GAO
Report-15-419) (available at www.gao.gov/assets/680/670153.pdf)
Also see GAO's September 2015 Report-15-566, RETIREMENT
SECURITY-Federal Action Could Help State Efforts to Expand Private Sector
Coverage (available at www.gao.gov/assets/680/672419.pdf).
(b) In General. There are advantages to utilizing an ERISA plan approach. Employers as well as employees can make contributions to ERISA plans, contribution limits are higher than for other state approaches that involve individual retirement plans (IRAs) that are not intended to be ERISA-covered plans,2 and ERISA plan accounts have stronger protection from creditors. Tax credits may also allow small employers to offset part of the costs of starting certain types of retirement plans.3 Utilizing ERISA plans also provides a well-established uniform regulatory structure with important consumer protections, including fiduciary obligations, automatic enrollment rules, recordkeeping and disclosure requirements, legal accountability provisions, and spousal protections.
2Some states are developing
programs to encourage employees to establish tax-favored IRAs funded by payroll
deductions rather than encouraging employers to adopt ERISA plans. Oregon
Illinois, and California, for example, have adopted laws along these lines
Oregon 2015 Session Laws, Ch. 557 (H.B. 2960) (June 2015); Illinois Secure
Choice Savings Program Act, 2014 Ill. Legis. Serv. P.A. 98-1150 (S.B. 2758)
(West); California Secure Choice Retirement Savings Act, 2012 Cal. Legis. Serv
Ch. 734 (S.B. 1234) (West). These IRA-based initiatives generally require
specified employers to deduct amounts from their employees' paychecks, unless
the employee affirmatively elects not to participate, in order that those
amounts may be remitted to state-administered IRAs for the employees. The
Department is addressing these state "payroll deduction IRA" initiatives
separately through a proposed regulation that describes safe-harbor conditions
for employers to avoid creation of ERISA-covered plans when they comply with
state laws that require payroll deduction IRA programs. This Interpretive
Bulletin does not address those laws.
3For more information
see Choosing a Retirement Solution for Your Small Business, a
joint project of the U.S. Department of Labor's Employee Benefits Security
Administration (EBSA) and the Internal Revenue Service. Available at
www.irs.gov/pub/irs-pdf/p3998.pdf.
The Department is not aware of judicial decisions or
other ERISA guidance directly addressing the application of ERISA to state
programs that facilitate or sponsor ERISA plans, and, therefore, believes that
the states, employers, other plan sponsors, workers, and other stakeholders
would benefit from guidance setting forth the general views of the Department
on the application of ERISA to these state initiatives. The application of
ERISA in an individual case would present novel preemption questions and, if
decided by a court, would turn on the particular features of the
state-sponsored program at issue, but, as discussed below, the Department
believes that neither ERISA section 514 specifically, nor federal preemption
generally, are insurmountable obstacles to all state programs that promote
retirement saving among private sector workers through the use of ERISA-covered
plans.
MARKETPLACE APPROACH
One state approach is reflected in the 2015 Washington State Small Business Retirement Savings Marketplace Act.4 This law requires the state to contract with a private sector entity to establish a program that connects eligible employers with qualifying savings plans available in the private sector market. Only products that the state determines are suited to small employers, provide good quality, and charge low fees would be included in the state's "marketplace." Washington State employers would be free to use the marketplace or not and would not be required to establish any savings plans for their employees. Washington would merely set standards for arrangements marketed through the marketplace. The marketplace arrangement would not itself be an ERISA-covered plan, and the arrangements available to employers through the marketplace could include ERISA-covered plans and other non-ERISA savings arrangements. The state would not itself establish or sponsor any savings arrangement. Rather, the employer using the state marketplace would establish the savings arrangement, whether it is an ERISA-covered employee pension benefit plan or a non-ERISA savings program. ERISA's reporting and disclosure requirements, protective standards and remedies would apply to the ERISA plans established by employers using the marketplace. On the other hand, if the plan or arrangement is of a type that would otherwise be exempt from ERISA (such as a payroll deduction IRA arrangement that satisfies the conditions of the existing safe harbor at 29 CFR 2510.3-2(d) ), the state's involvement as organizer or facilitator of the marketplace would not by itself cause that arrangement to be covered by ERISA. Similarly, if, as in Washington State, a marketplace includes a type of plan that is subject to special rules under ERISA, such as the SIMPLE-IRA under section 101(h) of ERISA, the state's involvement as organizer or facilitator of the marketplace would not by itself affect the application of the special rules.
42015 Wash. Sess...
