Illinois’ new Secure Choice program, which is supposed to let 1.3 million workers save for retirement easily through their jobs at small companies, is being threatened by an attempt by Congress to roll back business regulation, according to Illinois Treasurer Michael Frerichs.
Secure Choice, which Frerich’s office is in the process of launching, is supposed to be available to small-business employees in 2018. It would require small companies that employ more than 25 workers and don’t offer 401(k)s or pension plans to make available individual retirement accounts that would be run by the state. The program is expected to open up retirement savings opportunities to a whole new group of Illinois employees.
But it depends on newly adopted U.S. Department of Labor rules that will relieve small businesses of the threat of suits related to the Employee Retirement Income Security Act. Wednesday, the U.S. House Subcommittee on Health, Employment, Labor and Pensions announced proposed legislation that would overturn those new Labor Department rules.
The rules were adopted last year by President Barack Obama’s administration to help a handful of states — including Illinois and California — start new programs that would make it more palatable for small companies to accept the responsibility of offering workplace retirement plans. Some small-business groups have resisted offering retirement plans because of paperwork and legal requirements.
About half of the nation’s workers do not have retirement savings plans like 401(k)s at work, and most people do not save for retirement if they cannot do it easily at their workplaces, according to research by the Employee Benefit Research Institute.
Frerichs says he expects the legislation, introduced by Rep. Tim Walberg, R-Mich., and Rep. Francis Rooney, R-Fla., to reach the House floor next week and complicate the launch of the Illinois Secure Choice program if passed.
In a news release from the Education and the Workforce Committee, Rooney said he opposed the Obama administration’s rule because "Hardworking Americans could be forced into government-run plans with fewer protections and less control over their hard-earned savings."
"The goal is to do away with Illinois’ program," said Frerich. But rolling back the Labor Department rules doesn’t do that outright. The state, Frerich said, has the authority to offer the program and the federal legislation will only make it more complicated for businesses. If the legislation passes, he said, businesses will no longer be given protection from ERISA, and that will mean employees will be free to sue their employers if they find fault with the retirement plans.
In an attempt to free businesses of such worries, Secure Choice was designed, under a law passed in Illinois in 2014, to put the state in charge of the retirement savings plans. If the federal rules were overturned, small companies would still be required to channel employee money from the workplace into the state-run investment program.
AARP said in a press news release Wednesday that "upending the (Labor Department) rule would have a significant chilling effect on states adopting workplace plans."
In a letter to Congress, AARP Executive Vice President Nancy LeaMond urged House members to vote against the resolution to overturn the Department of Labor rule. She noted that 55 million working Americans do not have a way to save for retirement regularly out of their paychecks, and if millions don’t have adequate savings, taxpayers will bear the cost of people running out of money later.
gmarksjarvis@chicagotribune.com
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