At issue is whether states can help those workers — an estimated 55 million nationwide, typically employees at small and low-wage businesses — build up retirement savings with the same tax breaks enjoyed by workers at companies with 401(k) plans. Half a dozen states, including California, are developing ways for those workers to make automatic deposits into private individual retirement accounts overseen by the state, an approach that the Labor Department blessed in a ruling last year.
But some influential Wall Street firms cried foul, afraid that employers would have their workers sign up for the state IRAs rather than hiring the firms to create 401(k) plans — even though the firms have shown no interest in these employers or their workers. Their opposition was especially puzzling in California, where the state’s new Secure Choice savings program could lead 7.5 million workers without retirement plans to set up IRAs run by … Wall Street mutual funds.
Republican lawmakers responded with a resolution (HJ Res 66) to disapprove the Labor Department’s ruling. They argued that the state programs would victimize workers “forced” to contribute to these savings plans without the protection of federal law. Never mind that the savings plans all would have to comply with state safeguards — it’s richly ironic to hear Republicans argue for more federal regulation and less state control. The House rushed the resolution through in February, and the Senate just barely approved it Wednesday, sending it to Trump’s desk.
The real risk here isn’t that businesses might have to make an additional payroll deduction on their workers’ behalf, or that workers and their employers might miss having a rigid federal bureaucracy overseeing these retirement savings plans. The real risk is the one posed by the millions of adults who don’t have any kind of retirement plan, and the third of the country’s residents who haven’t set aside a dime for their dotage. Social Security benefits will keep many (not all) of them out of poverty, but not by much.
Trump is expected to sign the resolution, making it likely that any state that moves ahead will be sued for allegedly violating the federal law on workplace retirement plans. That’s a red herring. California should launch its savings program and make the case in court that it’s legal, because there’s no question that it’s needed.