BLK BlackRock Inc

By Sarah Krouse 

BlackRock Inc., the world's largest money manager, is pushing for broader changes to U.S. retirement law because of concerns about the "unintended consequences" of a new Obama administration plan designed to boost the savings of small business employees.

The suggestions, included in a new policy paper published on BlackRock's website Friday, are a response to a new Labor Department proposal that would make it easier for states to set up automatic individual retirement accounts for workers not covered by employer plans. California, Illinois and Oregon already have such efforts under way.

Under the new U.S. proposal, firms that help workers access state-run savings plans wouldn't have to comply with the Employee Retirement Income Security Act, most commonly known as Erisa, a sweeping law governing the way companies set aside money for retirees.

Small businesses are often reluctant to offer retirement plans to their workers because of the cost and complexity of Erisa requirements.

BlackRock isn't opposed to the proposal but in its new policy paper asks the Labor Department to ease the reporting and disclosure requirements of Erisa so companies that currently have plans won't shut them down.

Its concern is that the new Obama administration proposal will encourage companies to channel employees into state-run plans that are exempt from Erisa rules but offer lower savings limits and no employer contributions.

BlackRock made its paper public Friday and plans to circulate it in Washington.

"It's not a good idea to create regulatory arbitrage where you essentially crowd out the private sector and end up with a public-only system where the actual savings level is lower than what it replaced," BlackRock Vice Chairman Barbara Novick said in an interview.

A spokesman for the Labor Department said the administration's proposal was better positioned to encourage more savings than simply reducing disclosure requirements under Erisa, adding that the agency had already reduced some administrative burdens for employers.

"The proposed rule does not coerce employers or employees into state retirement plan arrangements. It merely facilitates state efforts to create default IRA arrangements for workers whose employers' don't offer savings programs," the department said in a statement.

Millions of Americans aren't putting enough money aside for retirement, despite reforms designed to bulk up nest eggs and encourage employees to sock away more. About 68 million U.S. workers are without access to workplace savings plans, according to the Labor Department.

The department's proposal to make it easier for states to sponsor retirement plans is the latest effort by the Obama administration to close the U.S. savings gap. The Treasury Department earlier this month started a federally backed retirement savings program called "myRA" for low and middle-income individuals.

Industry trade group The Investment Company Institute is opposed to the expansion of state retirement plans. Paul Schott Stevens, chief executive of the group, said state-run plans would offer "a confusing patchwork" of programs that "pose serious hazards for employers and workers".

Write to Sarah Krouse at sarah.krouse@wsj.com

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(END) Dow Jones Newswires

November 20, 2015 17:35 ET (22:35 GMT)

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