Auto-Enrollment IRAs Disapproved by Congress, Again

Author: Marta Moakley, XpertHR Legal Editor

UPDATE: On May 17, 2017, President Donald J. Trump signed H.J.Res.66.

May 5, 2017

A joint resolution that nullifies a rule advising states on auto-enrollment IRAs is headed to the President's desk.

The measure nullifies a rule submitted by the Department of Labor's Employee Benefits Security Administration (EBSA) regarding savings arrangements established by states for non-governmental employees. EBSA's rule guided states on how to design payroll deduction savings initiatives to reduce the risk of preemption by the Employee Retirement Income Security Act (ERISA).

The joint resolution was passed under the Congressional Review Act of 1996 (CRA). Congressional disapproval under the CRA strips a rule of any force or effect. A similar measure, which disapproved the EBSA rule relating to local government auto-enrollment IRAs, has already been signed into law.

Prior to the present Congress, the CRA had been used only once. However, since January, the CRA has been used to overturn regulations on a number of issues, ranging from the environment to telecommunications concerns. A joint resolution under the CRA requires a simple majority vote in both houses, so that the measures have been approved along party lines.

Five states have enacted auto-enrollment IRA legislation (California, Connecticut, Illinois, Maryland and Oregon), and a number of other states and municipalities are considering similar bills. The EBSA rule created a safe harbor status for these plans under ERISA's broad scope. However, after congressional disapproval of the EBSA rule, that status is now unclear.

Employees who would stand to benefit from auto-enrollment IRA programs include those employed by small, private employers that may not offer retirement savings plan options, or contingent workers who may not have access to employer-sponsored retirement plans.