New Mexico Governor Michelle Lujan Grisham in February signed House Bill 44, the New Mexico Work and Save Act.
Under the legislation, privately employed and self-employed workers who don’t have employer-based retirement accounts may be provided the ability to contribute into Roth individual retirement accounts (IRAs) in a savings program overseen by a state-appointed board. The law also establishes an online marketplace from which employers that want to offer their own plan can find and compare low-cost retirement savings options.
A summary published by members of Mercer’s Law & Policy Group points out that the law specifically exempts employers from fiduciary responsibilities under the savings program. In 2016, as states were proposing or beginning to implement their own retirement savings programs, the Department of Labor (DOL) issued regulations providing a safe harbor from Employee Retirement Income Security Act (ERISA) coverage to reduce the risk of ERISA pre-emption of the relevant state laws. However, in 2017, Congress passed, and President Donald Trump signed, resolutions to roll back the regulatory safe harbors created by the Obama administration. The DOL said those resolutions invalidated its rule.
Mercer notes that employer plans offered through the newly established marketplace, however, will generally be subject to ERISA. It also notes that participation in the work and save program is voluntary for both employers and employees.
The marketplace is a different approach from what most states have done to attempt to close the retirement plan coverage gap. Mercer points out that key features of the marketplace include:
- It can offer an array of plans, including individual plans, multiple employer plans, 401(k)s and 403(b)s;
- It will offer a financial literacy module for employers and employees;
- Employers may use automatic enrollment and escalation as long as employees are able to opt out; and
- Plans in the marketplace may, but are not required to, offer distribution options beyond lump-sums, such as systematic withdrawals, guaranteed lifetime withdrawal benefits and annuities.
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