WASHINGTON >> The U.S. Senate on Wednesday dealt a blow to California and other states that have been trying to help private-sector workers save for retirement, voting to overturn a federal Department of Labor rule allowing states to establish 401(k)-type programs for those who can’t get them through their jobs.
The House of Representatives passed the resolution in February, and the bill now goes to President Donald Trump’s desk.
Democratic leaders such as California Sen. Kamala Harris slammed the vote as an example of the GOP caving to Wall Street. California Senate leader Kevin de León said Republicans in Washington had reached “a new low” in “subservience to Wall Street interests” — but he vowed to continue rolling out the state’s new program.
“California will not be deterred,” de León wrote. “Working well into your ‘Golden Years’ only to retire into poverty is not what the American Dream is about.”
California is one of at least five states, including Oregon, Maryland, Illinois and Connecticut, that have established payroll deduction programs for workers without retirement benefits — an estimated 7.5 million people in California alone.
Senator Kamala Harris posted her opinion on Twitter shortly after the vote, telling followers “At the behest of the financial services industry, Republicans just overturned a rule that helps American workers save for retirement.”
Secure Choice, which California lawmakers approved last year, would automatically enroll workers in a low-fee plan at no cost to the employer. The funds would be managed by a financial-services firm and overseen by a state board led by the state treasurer. Workers could opt-out of the plan if they didn’t want to participate.
Republicans in Congress have argued that the state 401(k) programs aren’t bound by the same rules as traditional private-sector programs, giving them an unfair advantage that might cause some employers to drop their benefits in favor of the cheaper state option. They acknowledge that far too many Americans have not saved for retirement but say state-run plans are not the solution.
But proponents of such measures note that the workers who would more easily save for retirement through the plan have long been ignored by the private sector — and that this will hurt small businesses. Roughly 40 million American households have no money in retirement-savings accounts, and nearly half of the workforce doesn’t have a retirement plan at work.
Mark Herbert, California Director of Small Business Majority, said only 14 percent of small businesses offer retirement plans.
“Striking down this rule will have a chilling effect on states like California that are establishing their own retirement savings programs,” Herbert said, “which in turn will harm California’s small businesses and employees.”
