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Senate votes to kill rule that would help cities launch retirement plans

Republican Senator Orrin Hatch of Utah argued that private-sector retirement plans are run more efficiently than those offered by governments. JUSTIN SULLIVAN/GETTY IMAGES

WASHINGTON — The Senate voted Thursday to roll back an Obama-era rule that would make it easier for major cities to launch retirement plans.

A measure approved 50 to 49 would scale back a Labor Department rule finalized last year that clears hurdles for large cities seeking to launch retirement plans for people who don’t have access to such plans through their jobs.

The resolution needs President Trump’s signature to take effect.

The Senate will vote on a similar measure that could make it more difficult for states to create retirement plans. (While the rules affecting states and cities are similar, Congress needs to vote on each separately.)


The Labor Department rules were designed to make it easier for states and cities by exempting them from the Employee Retirement Income Security Act (ERISA), which governs workplace retirement plans and pensions.

But the efforts from state and local governments are facing resistance from Republicans and business groups, which argue the government shouldn’t be creating retirement plans. Some critics say they local plans may discourage some employers from offering their own retirement programs.

On Wednesday, Republican Senator Orrin Hatch of Utah argued that private-sector retirement plans are run more efficiently than those offered by governments. He also said he worried the ERISA exemption would give states and cities an unfair advantage over employers.

Supporters of the approach say local efforts may help eliminate one of the biggest obstacles workers face when it comes to saving for retirement: access to a savings plan. About 55 million Americans don’t have retirement accounts or pensions at work, according to AARP, which supports the measure.

The programs would aim to take the hassle out of saving for retirement by automatically enrolling people in individual retirement accounts. Workers would also have the contributions deducted directly from their paychecks. People who don’t want to participate would be able to opt out.


‘‘When workers are automatically enrolled, they are more likely to save simply because it’s easier,’’ said Senator Patty Murray, Democrat of Washington.

Some of the cities considering launching retirement programs, such as New York, Philadelphia, and Seattle, may halt their efforts without the Labor Department rule.

When New York unveiled its proposal in October, the city estimated it would affect 1.5 million New Yorkers — or nearly 60 percent of the city’s private-sector workers.

‘‘Republicans in the Senate just voted to prevent Americans from saving for retirement,’’ New York City Comptroller Scott M. Stringer said in a statement. ‘‘This vote was an active, willful attempt to undermine the economic security of Americans.’’

Over the next several weeks, the Senate could take up the resolution that would undo the rule affecting state plans. At least seven states — California, Oregon, Illinois, Maryland, Connecticut, New Jersey, and Washington — are in the process of creating state-run retirement plans. More than 20 other states have expressed interest, according to AARP.

Officials from some states, including Oregon and Maryland, say they may be able to proceed with their retirement programs even without the Labor Department rule. But the lack of clarity could cause some states to think twice before launching programs, said Josh Gotbaum, chairman of Maryland’s state retirement program. ‘‘In the states that haven’t done this yet, this slows everything down,’’ he said.