California’s Auto-Retirement Program Upheld From ERISA Challenge

March 10, 2020, 8:24 PM

A federal judge in California on Tuesday upheld the state’s new auto-retirement program from a legal challenge claiming the program interferes with the federal Employee Retirement Income Security Act.

The CalSavers Retirement Savings Program doesn’t create an “employee benefit plan” under ERISA and therefore isn’t preempted by the federal statute, Judge Morrison C. England Jr. of the U.S. District Court for the Eastern District of California concluded.

That’s because CalSavers isn’t established or maintained by an “employer” and doesn’t “relate to” any ERISA plan, he said.

“Actual employers have no discretion in the administration of CalSavers and do not make any promises to employees; employers simply remit payroll deducted payments to the Program and otherwise have no discretion regarding the funds,” England said.

CalSavers requires employers that don’t offer retirement benefits to set up automatic payroll deductions into individual retirement accounts for employees who want it. The program is being challenged by Howard Jarvis Taxpayers Association, a California policy group that advocates for lower taxes.

CalSavers is among the first of a number of similar state programs to be challenged in court. Connecticut, Illinois, Maryland, and Oregon have established similar programs.

Morrison first dismissed the lawsuit in 2019 but gave Howard Jarvis an opportunity to refile. Last fall, the federal government weighed in in support of Howard Jarvis, arguing that CalSavers is preempted by ERISA.

Howard Jarvis represents itself. CalSavers is represented by Trucker Huss APC and the California Department of Justice.

The case is Howard Jarvis Taxpayers Ass’n v. Calif. Secure Choice Ret. Sav. Program, E.D. Cal., No. 2:18-cv-01584, 3/10/20.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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