BlackRock Warns of 'Unintended Consequences' From New Obama Retirement Proposal -- Update
November 20 2015 - 5:50PM
Dow Jones News
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
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 20, 2015 17:35 ET (22:35 GMT)
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