(Adds reaction, details, background)
By Lisa Lambert and Sarah N. Lynch
WASHINGTON May 3 The U.S. Senate voted narrowly
on Wednesday to repeal an exemption from strict federal
protections that former President Barack Obama's Labor
Department had given to state-sponsored retirement savings plans
for lower-income workers.
The exemption, championed by states such as California but
opposed by the mutual fund industry, had freed the state-run
plans from the strict compliance requirements of the Employee
Retirement Income Security Act, or ERISA.
Private-sector workers whose employers do not offer 401(k)
or other retirement benefits, and who often have low incomes,
are automatically enrolled in plans being launched in some
states, such as Illinois. States say the exemption would have
let employers pass workers' money into plans without footing
ERISA compliance costs.
It stoked fights in Washington, however, over the reach of
federal regulation, states' rights and income inequality.
The Republican-led Senate passed the resolution repealing
the exemption by a vote of 50-49. The House of Representatives,
also controlled by Republicans, previously approved the measure,
which President Donald Trump is expected to sign into law.
It was the 14th Obama-era rule killed by Congress under the
once-obscure Congressional Review Act, which allows lawmakers to
repeal newly minted regulations and forbids agencies from
enacting similar rules in the future.
In mid-April, Trump signed a nearly identical resolution
affecting city-run retirement plans, which are in the design
stages. But the resolution for state-run plans was stuck in
limbo for weeks, as Republicans struggled to gather votes and
major lobby groups representing retirees and business interests
turned up the heat on lawmakers.
Senator Dick Durbin, an Illinois Democrat, missed
Wednesday's vote because of minor heart surgery, helping the
Senate avoid a tie.
Republican Senator Todd Young of Indiana broke party ranks
to oppose the resolution, saying Americans were in a "real and
ongoing crisis" to save enough money for retirement.
"While state-based retirement plans are not my first choice,
if implemented carefully, they could help close the retirement
savings gap," he said in a statement to Reuters.
The California plan's primary champion, Democratic state
Senator Kevin de Leon, expressed outrage at the vote, saying
taxpayers would ultimately foot the bills of people who retire
without adequate savings.
"Wall Street investment firms fear their profits will take a
hit ... even though the investment industry has historically
ignored middle- and lower-income workers at medium- and
small-sized businesses," he said in a statement.
The mutual fund, insurance and securities industries said
the exemption would have denied some workers protections that
are guaranteed for others.
"Denying ERISA protections to workers who are automatically
enrolled would limit their legal remedies to fight against high
fees or mismanagement of the plans," said Paul Schott Stevens,
president of the Investment Company Institute, a trade group
representing funds holding $19.3 trillion in assets and that are
often used to save for retirement.
(Reporting by Lisa Lambert and Sarah N. Lynch; Editing by Peter