WASHINGTON, March 30 (Reuters) - A divided U.S. Senate on Thursday sent a resolution to the president’s desk killing a Labor Department regulation aimed at lightening federal restrictions for new municipally sponsored retirement savings plans for lower-income workers.
The rule, championed by states such as California but opposed by the mutual fund industry, exempted local municipal retirement savings plans from strict pension protection laws.
Utah Republican Orrin Hatch, the resolution’s sponsor, said on Wednesday he expects the Senate to act in the near future to repeal a related rule affecting state retirement savings plans.
The resolution repealing the municipal retirement savings rule, approved by a 50-49 vote in the Senate and previously approved in the House of Representatives, marked the 12th time the Republican-controlled Congress has successfully killed an Obama-era regulation through the use of an obscure 1996 law known as the Congressional Review Act.
The law lets Congress fast-track the repeal of newly minted rules through a simple majority vote in the House and Senate, and a signature from the president. Once a rule is repealed, a “substantially similar” rule cannot be enacted in its place.
The Review Act sets a window of time where Congress can nullify regulation before it takes full effect. The Labor Department rule was finalized after the last day of May 2016, putting it into the window.
Using the resolutions, Republicans have sent rules spanning a variety of areas to the chopping block in hopes of loosening regulation they say constricts job and business growth.
Thursday’s resolution and its near-twin for state plans counter the trend by keeping in place regulations small businesses must follow if their employees enroll in the retirement programs.
Towards the end of President Barack Obama’s tenure, his Labor Department exempted both state and municipally run retirement savings plans from the landmark 1974 Employee Retirement Income Security Act, or ERISA - a law designed to protect workers’ savings that details compliance requirements.
Private-sector workers whose employers do not offer 401(k) or other retirement benefits, and who often have low incomes, are automatically enrolled in the plans in states such as California, Illinois and Oregon.
States say the exemption from ERISA lets employers pass workers’ money into plans without having to foot compliance costs.
They also say Wall Street wants to block the plans because they create competition.
But the Investment Company Institute, a mutual funds trade group, and U.S. Chamber of Commerce say the exemptions short-change workers from important federal pension protections that other workers receive.
“To be blunt, places like New York City shouldn’t just get a pass,” said Hatch during the Senate debate on the resolution, which started Wednesday.
Reporting by Sarah N. Lynch; Editing by Steve Orlofsky