The U.S. Department of Labor has proposed a rule designed to enable states to enact their own retirement savings plans.
The proposed new rule sets out the circumstances for a payroll deduction savings program, including one with an automatic enrolment feature, to avoid being considered an employee pension benefit plan under federal pension legislation.
In announcing the move, U.S. Secretary of Labor Tom Perez says that this sets the stage “for more states to create retirement savings options that help their workers save for retirement at work.”
U.S. states such as Illinois, Oregon, Washington and California have passed legislation to create payroll-based retirement savings vehicles, but concerns that these programs may run afoul of federal pension law have hindered these efforts, he notes: “The rule that the Department of Labor is proposing today gives states the best possible path forward consistent with federal law.”
In Canada, a couple of provinces have looked to create their own provincial pension plans after past talks to bolster the Canada Pension Plan (CPP) failed. However, the recently elected federal Liberal government has promised to enhance the CPP, which may render provincial plans, such as Ontario’s proposed plan, unnecessary.