State of the State Houses
State of the State Houses is an occasional feature that provides the status of legislation before state legislatures relevant to NTSA members.
Alaska. AK HB 83
would provide certain employees an opportunity to choose between the defined benefit and defined contribution plans of the public employees' retirement system and the teachers' retirement system.
hearing before the State Affairs Committee secheduled for April 3.
California. CA SB 1149
would create a new optional defined contribution plan for new state employees who are eligible to become members of CalPRS and who choose not to make contributions into the DB program. The bill also would:
- Require state employees who opt to participate in this alternate system to contribute the same percent of compensation as similarly situated employees who contribute to the DB program, subject to applicable limits of federal law.
- Authorize an employee in the DC program, after five years, to have the right to continue in the program or switch to the DB plan, subject to certain terms and conditions.
Hearing scheduled for April 9 cancelled at the request of the bill author.
Colorado. SB 18-200
would allow new employees to choose between the PERA defined contribution plan and the hybrid defined benefit plan.
Passed the Colorado Senate on March 27.
District of Columbia. DC B 22-0749
would establish a deferred retirement option program (DROP), administered by the District of Columbia Retirement Board, under which board would create separate interest-bearing DROP accounts for participating eligible members, allowing members to continue working while receiving monthly retirement benefits in his or her DROP account.
The Committee on Judiciary and Public Safety has reported this bill to the City Council.
Kentucky. KY SB 1
contains significant changes from the initial pension reform proposal released in October of 2017. Senate Bill 1 would not force any current or future state employees or teachers into a DC (401(k)-style) retirement plan. It also would not require all employees and teachers to pay an extra three percent of their salary for a retiree health benefit. The bill would not create an incentive for employees and teachers to retire at their earliest possible eligibility by ending the ability to accrue more service credit in their current DB plan.
The pension reform bill passed both chambers during the last week of March and now sits on the desk of Gov. Matt Bevin (R). On April 3, all 120 public schools closed as teachers rallied in Frankfort to protest the bill.
New York. NY A 6278
and NY A 4523
would set up a DC plan for new hires in lieu of DB plan participation.
Each measure was amended and recommitted to the Standing Committee on Governmental Employees on March 27.
Standard of Care/Disclosure
Illinois. HB 4753
, The Investment Advisor Disclosure Act, is a skeleton bill that was introduced in early February and has not moved since being referred to the Rules Committee on Feb. 13. There are approximately two months left in the legislative session.
A source monitoring the bill suggests that HB 4753 can be passed with the details to be filled out later.
On March 19, the Financial Consumer Protection Act of 2018 (MD SB 1068
) passed out of the Maryland Senate Finance Committee favorably with amendments just a week after the companion bill (MD HB 1634
) successfully passed through the House of Delegates with similar modifications.
As initially drafted, the Financial Consumer Protection Act of 2018 would have created a fiduciary duty for broker-dealers, insurance agents, and investment advisers to act ‘primarily for the benefit of its clients.’ Not only would this provision have further complicated the regulatory burden for firms and professionals alike, but the fiduciary standard it would have established could have resulted in a preemption conflict with ERISA.
In early March, the American Retirement Association government affairs team reached out to the lead sponsor of SB 1068, Sen. Jim Rosapepe (D), to communicate its concerns regarding preemption. Rosapepe subsequently referred us to the Office of the Maryland Attorney General with whom we have arranged a meeting to further communicate our position. Those concerns were heard — the Senate version of the bill now no longer includes the fiduciary obligation and now directs the Maryland Financial Consumer Protection Commission to study:
1. the DOL rule and any Securities and Exchange Commission actions in addressing conflicts of interest of broker-dealers offering of investment advice by aligning the standard of care for broker-dealers with that of the fiduciary duty of investment advisers; and
2. changes to state law to provide the protection intended by the U.S. Department of Labor conflicts of interest rule addressing fiduciary duty standards of care.
The state Senate passed MD SB 1068 on March 21; the bill was referred to the House Rules and Executive Nominations Committee on March 28.
The New York Department of Financial Services issued proposed rulemaking
in Dec. 2017 to impose ‘best interest’ standard (built around suitability) on insurers/producers in insurance and annuity products. The comment period closed Feb. 26, 2018.
New York will issue its regulation before the National Association of Insurance Commissioners (NAIC) comment period ends. New York wants to implement its regulation by August 2018 in order to convince the NAIC that its regulation should be the model regulation.
Joseph A. Caruso, III, JD, MSPPM, is Government Affairs Counsel for the American Retirement Association.