If regulators find that ERISA does apply, the California proposal would be too cumbersome to operate, de León said, and would doom his measure. But since there is no employer match, de León is confident the government will find the state’s program looks more like an IRA than an employer-sponsored plan, exempting it from the federal requirements.
He said employers “are not on the hook for any financial advice, they’re not on the hook for making any matching financial contribution that would subject them to ERISA.” Once the program is set up, de León will have to win the legislature’s support once more to get it running.
The law has split the financial-services sector and the business community, with some concerned that the state would compete against private financial companies while others prefer to focus on the prospect of tapping into a huge new market of savers.
“There is already a very strong and very competitive retirement savings market out there,” said Kim Chamberlain, a state lobbyist for the Securities Industry and Financial Markets Association. A better course of action, she added, would be for the state and the private sector to come together to “educate small employers and individuals about the benefits of these types of plans.”
But Brian Graff, CEO of the American Association of Pension Professionals and Actuaries, prefers to focus on the fact that state programs like California’s would provide new customers for financial firms.
“We are very focused on trying to expand coverage,” he said. “When people are covered by a workplace plan, they are 15 times more likely to save for retirement.”
Vice President Joe Biden waits to conduct a mock swearing-in ceremony with Sen. Brian Schatz, D-Hawaii, in the Capitol's Old Senate Chamber, December 2, 2014. Schatz was sworn in to serve the remainder of his term since he was appointed to the seat after Sen. Daniel Inouye, D-Hawaii, passed away.