By Sarah N. Lynch and Lisa Lambert
WASHINGTON (Reuters) – A divided U.S. Senate on Thursday removed a regulation exempting city-run retirement savings plans for low-income workers from strict pension protection laws.
Utah Republican Orrin Hatch, a sponsor of the resolution, has said he hopes the Senate will soon repeal a related rule on state-operated retirement plans.
That resolution may face a more difficult time than municipal plans, which barely passed in a 50-49 vote. States are further along in establishing retirement programs for people who do not have savings plans in the past. workplace, and Republicans who advocate for states’ rights are more skeptical of the resolution.
The House of Representatives has already passed both resolutions.
Thursday’s vote marked the twelfth time the Republican-controlled Congress has successfully removed an Obama-era regulation through the use of an obscure 1996 law known as the Congressional Review Act.
The law allows Congress to repeal a new rule through a simple majority of votes in the House and Senate, and a signature of the president. A “substantially similar” rule can never be promulgated in its place.
The Department of Labor rule was finalized after May 2016, placing it within the time window established by law when Congress can repeal it. Using the resolutions, Republicans have sent rules that span a variety of areas to the chopping block in hopes of loosening regulation they say restricts economic growth.
Thursday’s resolution and its near-twin for state plans counteracts the trend by maintaining regulatory requirements.
Towards the end of President Barack Obama‘s term, his Department of Labor exempted state and municipal retirement plans from the Employee Retirement Income Security Act of 1974, or ERISA, a law designed to protect workers’ savings with detailed compliance requirements.
Private sector workers whose employers do not offer 401 (k) or other retirement benefits, and who often have low incomes, are automatically enrolled in plans that are being launched in states like California, Illinois and Oregon.
States say the ERISA exemption allows employers to move workers’ money into plans without covering compliance costs.
They also say that Wall Street wants to block the plans because they create competition.
But the Investment Company Institute, a mutual fund trade group, the U.S. Chamber of Commerce and others in financial services say the exemptions cut workers off important federal pension protections other workers receive.
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