California’s Auto-Retirement Program Defends Criticism From Feds

Oct. 16, 2019, 5:23 PM

California’s new auto-retirement program can exist alongside federal benefits law, despite federal regulators’ arguments to the contrary, the program’s chairman told the Eastern District of California.

The California Secure Choice Retirement Savings Program—called CalSavers—doesn’t create a plan governed by the Employee Retirement Income Security Act or interfere with the federal statute in any way, the program and chairman John Chiang argued in an Oct. 15 court filing. The program merely requires covered employers to withhold and forward payroll deductions to CalSavers, which doesn’t involve the level of employer discretion required to create an ERISA plan, Chiang said.

Chiang is responding to a Sept. 13 court filing in which the federal government intervened in a lawsuit challenging the CalSavers program to argue that the program is preempted by ERISA.

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.

The program cleared a legal hurdle in March, when Judge Morrison C. England Jr. of the U.S. District Court for the Eastern District of California dismissed Howard Jarvis’s preemption challenge. The federal government weighed in after England allowed the tax group to file an amended complaint.

Howard Jarvis represents itself. CalSavers is represented by Trucker Huss APC and the California Department of Justice. The U.S. Department of Justice represents the federal government.

The case is Howard Jarvis Taxpayers Assoc. v. Cal. Secure Choice Retirement Savings Program, E.D. Cal., No. 2:18-cv-01584-MCE-KJN, response to statement of interest 10/15/19.

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

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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