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Federal Government Halts City’s Plan to Establish Private Sector Retirement Savings Program


de Blasio retirement savings

(photo: Demetrius Freeman/Mayor’s Office)


Through a recently-signed resolution, President Donald Trump and the Republican-controlled Congress have struck a death blow to New York City’s plan to become the first city in the country to establish a retirement savings program for private-sector employees.

After advocates and elected officials identified a crisis in the limited amount most workers have saved for retirement and started calling for government action, Mayor Bill de Blasio announced during his February 2016 State of the City speech that New York would set on a path to create a system whereby almost all private-sector employees would have mandated access to a retirement savings program.

There would be no city match of money or guarantee of pension payouts, like with the public employee system, but the city would help launch, promote, and oversee a program that provided employees at most private-sector companies the opportunity to put aside retirement savings money in a managed investment account.

Two weeks after he announced the initiative, de Blasio and others who had spurred the effort -- especially Public Advocate Letitia James, City Council Member Ben Kallos, Comptroller Scott Stringer, liberal activist Bill Samuels, and members of AARP-NY -- held a celebratory rally at City Hall. They said they were pushing the federal Department of Labor to issue rules paving the way for their plan and that legislation would soon be introduced at the city level.

Several months later, in the waning days of the Obama administration, the Department of Labor did issue such a ruling, but just a few months after that, the new Congress passed a resolution to negate the permission the DOL had extended to large cities like New York. President Trump then signed the bill on April 13. According to multiple sources, and further illuminated by International Business Times reporting, the financial services industry has been opposed to allowing city and state-backed private-sector programs, which led to federal action.

Bannon whiteboardIn fact, rolling back city permission appears to have been a high priority for the Trump administration. In photos posted to Twitter by a visitor to his office (left), top Trump advisor Steven Bannon is shown to have listed the resolution number one under “Bills,” as part of several lists of priorities and pledges.

“This is a deeply disappointing move by President Trump and Congressional Republicans,” said Freddi Goldstein, a spokesperson for Mayor de Blasio, in a statement to Gotham Gazette. “As the mayor has repeatedly pointed out, fewer than half of all working New Yorkers have access to a plan that can help them save for their retirement years. This legislation does little more than block them from securing their futures.”

When city officials and advocates were celebrating their plan for such a program last year, they pointed out that “most private sector workers in New York City do not have any access to a retirement savings program, disproportionately impacting low-income, immigrant, minority, and female New Yorkers,” according to an announcement from the mayor’s office. It also said that “only 43 percent of working New Yorkers have access to a plan that can help them save for retirement: and “even those who have started to save do not have much: 40 percent of New Yorkers between the ages of 50 and 64 have less than $10,000 saved for retirement.”

Importantly, corresponding state-level efforts to create a private-sector retirement-savings program have not yet been nullified in Washington, D.C. -- several states already have programs in motion, but no cities. The House of Representatives passed a resolution to roll back the Department of Labor ruling dealing with states, and on Wednesday it moved through the Senate, and will head to President Trump's desk.

The Senate votes on both the city and state measures was 50-49, with one senator not voting.

In New York, Gov. Andrew Cuomo established in 2016 a commission to study the issue and recommend details for a program. While that effort, known as The SMART Commission, has moved slowly, the governor’s office insists it is progressing. Perhaps sensing its slow pace, de Blasio and city officials decided to move on a program as well. Now, city stakeholders will have to watch to see if Congress disallows the state from continuing, and, if not, whether Cuomo will indeed act to create a system for private sector retirement savings.

“The SMART Commission continues its work examining all ways we can create a state-administered retirement system to bolster savings for New Yorkers,” a spokesperson for Gov. Cuomo emailed Gotham Gazette in late March. “The Commission continues to meet and a report on their findings will be issued in the coming months.”

Despite the move by federal officials to block cities from instituting such programs, Public Advocate James and Council Member Kallos decided to symbolically introduce legislation for a city system.

“The federal government is failing our seniors when it comes to retirement security,” James said in a statement. She and Kallos are urging Trump to veto the state-related resolution if it gets to his desk through the Senate.

Kallos told Gotham Gazette that he and James felt it was important to introduce the city legislation anyway, and that perhaps there is hope for the future. “We had wanted to introduce it before [the federal resolution] was signed, but even after it was signed we felt it was worth introducing, because maybe one day we’ll be able to move forward.”

“Most New Yorkers aren’t saving for their retirement,” Kallos said, adding that New Yorkers should know it is the federal government that is helping to hold them back. The city program would be “opt out,” meaning that eligible workers would be automatically enrolled through their employers and have to actively choose to not participate. The only contributions would be from the employees, likely starting at a low fixed percentage of earnings with the ability to dedicate more toward what would in most cases be low-risk investment.

Kallos said that he and James have been working closely with the de Blasio administration and its federal lobbyists. “Tish has been in the lead,” he said of James, “the City Council has played a role, and the Mayor’s Office has been pushing in D.C.”

The two bills (Int. 1574 and Int. 1580) introduced by James and Kallos would establish a program and a board to oversee it. “The Board would be established to administer the plan, engage in rulemaking, auditing, and reporting, along with public education and community outreach forums,” according to information from the offices of Kallos and James. “The plan would cover all employers with more than ten employees that did not already offer a retirement plan. At no cost to the employer, private sector employees would be automatically enrolled, with an option to decline, in a payroll deduction pre-tax retirement savings plan administered by the City.”

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by Ben Max, Gotham Gazette
     

Read more by this writer.

Note: this article has been updated to reflect the Senate vote on the state-related measure.



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