Congress effectively put the brakes on a plan by the city of Philadelphia that would have allowed small businesses to set up retirement-savings plans for their workers.
Two votes by the House of Representatives Wednesday afternoon rolled back changes in U.S Labor Department regulations involving worker retirement plans. For months, relying on the changes, the City Controller's Office has been working on a plan that would have allowed small businesses to set up retirement-savings plans for their workers.
The votes were 231-193 on one measure and 234-191 on a related measure, along party lines, with Republicans voting to roll back the regulations.
"It's callous," City Controller Alan Butkovitz said in an interview Wednesday. Philadelphia had been one of three cities exploring city-administered retirement-savings plans for small businesses that didn't have the time or the expertise to set up plans for their employees.
Butkovitz had joined New York City's comptroller and the chairman of the Seattle City Council's finance committee in a letter urging the legislators to vote "no" on the two resolutions, H.J. Res. 66 and H.J. Res. 67.
The regulations had permitted states and municipalities to devise retirement systems. Philadelphia had been at the forefront, one of a handful of cities nationwide to contemplate establishing a retirement system for business owners and their employees.
"How can anyone be against this?" Butkovitz asked.
The U.S. Chamber of Commerce wrote a similar letter, with the opposite point of view, urging Congress members to roll back the changes.
Allowing states and municipalities to create their own plans would set up a confusing array of regulations, wrote Jack Howard, senior vice president for governmental affairs for the chamber. "It would be particularly problematic for companies with operations spanning state boundaries."
Howard added workers' savings would not be as well-protected as they have been under federal law.
Butkovitz said some opposition from business might result because some of the proposed state and city plans might require businesses to participate. The plan contemplated in Philadelphia was strictly voluntary, however.
"Nearly 55 million workers across the country lack access to employer-sponsored retirement plans, and millions more fail to take full advantage of employer-supported plans," Butkovitz and the others wrote in a letter to House Speaker Paul Ryan, a Republican.
"States across the country have been innovating to address this problem," the letter said, adding, "Thirty states and municipalities are in the process of implementing or exploring the establishment of state-facilitated, private-sector retirement programs."
Although the details were not finalized and several approaches were under consideration, the idea in Philadelphia was to create what would amount to a city government-administered plug-and-play system for small employers who have neither the money nor the expertise to create retirement plans for their employees.
Here's how it would have worked: Employers would instruct their payroll companies to set up another deduction, a simple step. Employees would contribute. Employer contribution would be optional and would depend on the type of plan to be set up.
The hard parts — figuring out who should invest the money collected and administering the accounts with monthly statements and tax forms — would have been handled by the city, either through the same services it uses to manage and administer the municipal retirement-savings accounts or by putting the project out for bid to a big investment firm, such as Vanguard or Prudential.
The City Controller's Office had sponsored meetings for businesses around the city, with people like Nancy Morozin, owner of the Dining Car diner in Northeast Philadelphia, in attendance. Morozin said she applauded an idea that would help her help 100 employees save for retirement.
Butkovitz said a City Council task force had been looking into the plan.