Feds ease rules on state-run retirement accounts

Not everyone was thrilled with the new regulation.

“We are disappointed with the Department of Labor’s final rule, which exempts state-run retirement programs for private sector employees from vital consumer protections provided by ERISA,” said Investment Company Institute CEO Paul Schott Stevens in a statement.

“Several states have already moved forward with state-run ‘Secure Choice’ style plans — programs that are fraught with risks for taxpayers and savers,” Stevens said in his statement.

Labor Department spokesman Jason Surbey disagreed, saying that the protections for IRAs are no different for states than they are for the private sector. The regulation requires that states assume responsibility for the safety of employee contributions, including protection from mismanagement and fraud.

“In this case, the moneys involved belong to the workers, and are subject to protection under the Internal Revenue Code, including the requirement that the assets be held in trust and the prohibitions on committing prohibited transactions,” Surbey wrote in an email.

Update: This story has been updated with comment from the Department of Labor.