Wall Street Wins: Republicans Vote To Block States From Offering Low-Cost Retirement Savings Plans To Millions Of Workers

House Republicans voted to rescind a federal rule making it easier for states to offer basic retirement savings plans to millions of workers. As International Business Times reported last week, the chief sponsors of the bill have been heavily supported by campaign cash from the finance industry, which has lobbied against the plans.

The Department of Labor rule at issue — which was enacted by the Obama administration — sought to clarify federal statutes and protect the legal status of state-based retirement savings plans. Eight states have already taken action to create such plans, which threaten to reduce the profits of financial firms by creating a low-fee option for workers’ retirement savings. Twenty-three million workers in those eight states do not already have retirement savings coverage, according to a new analysis by labor economist Teresa Ghilarducci. Thirty one out of 32 Republican lawmakers from the eight states that currently have retirement savings plans voted to rescind the federal rule that protects those plans.

“If Republicans succeed in rolling back DOL regulations, they will destroy the best chance 63 million American workers have of getting access to a retirement plan,” said Ghilarducci, who estimated that another 40 million Americans without coverage would also be prevented from accessing low-fee retirement savings plans if the GOP bill becomes law. “These states took the responsible first step to save their residents from a retirement crisis defined by low coverage and inadequate savings and protect their taxpayers from the fiscal crisis resulting from millions of indigent elderly. This would be a painful step backwards for the millions who are shut out from the dwindling number of employer-sponsored plans.”

The Republican sponsors of the legislation have argued that the government should not crowd out private financial firms, which offer such services.

“Our nation faces difficult retirement challenges, but more government isn’t the solution,” said Rep. Tim Walberg (R-MI), who authored the repeal bill. “A better way is to reduce costly red tape and make it easier for small businesses to band together to offer retirement plans for their employees. I urge my colleagues to support these resolutions, which are part of a broader agenda to ensure more Americans can retire with the financial security and peace of mind they need.”

After the bill was introduced, the Sacramento Bee reported that California Gov. Jerry Brown, a Democrat, sent a letter to lawmakers asking them to reject the legislation.

“I understand that Wall Street institutions strongly object to California and other states setting up such systems,” wrote Brown, who signed “Secure Choice” legislation to create a retirement savings plan for workers who do not already get retirement benefits. “They think the dollars that move into Secure Choice should instead flow into their own products. I consider this a feature, not a defect, of Secure Choice. Indeed, we hope to enroll those who historically [have] not been served by the savings industry.”

Currently, California, Illinois, Oregon, Connecticut, Washington, New Jersey, Maryland and Massachusetts have some form of state-administered retirement savings plan in place. The following Republican lawmakers from those states voted to repeal the federal rule that protects the plans in their states: LaMalfa (CA), McClintock (CA), Cook (CA), Denham (CA), Valadao (CA), Nunes (CA), McCarthy (CA), Knight (CA), Royce (CA), Calvert (CA), Walters (CA), Rohrabacher (CA), Issa (CA), Hunter (CA), Roskam (IL), Bost (IL), Hultgren (IL), Shimkus (IL), Kinzinger (IL), LaHood (IL), Herrera (WA), Newhouse (WA), McMorris Rodgers (WA), Reichert (WA), LoBiondo, MacArthur (NJ), Smith (NJ), Lance (NJ), Frelinghuysen (NJ) and Harris (NJ).