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CalSAVERS Not Governed By ERISA


The California Secure Choice Retirement Savings Program for private-sector workers is not governed or pre-empted by ERISA, the federal law on employee benefits, the U.S. Court of Appeals for the Ninth Circuit ruled May 6. The program, known as CalSavers, was created in 2017.
 
 

CalSAVERS Not Governed By ERISA


The California Secure Choice Retirement Savings Program for private-sector workers is not governed or pre-empted by ERISA, the federal law on employee benefits, the U.S. Court of Appeals for the Ninth Circuit ruled May 6. The program, known as CalSavers, was created in 2017.
 
In an unanimous ruling, a three-judge panel ruled CalSavers is not an employee benefit plan under ERISA because it is established and maintained by the state and does not require private employers to create their own ERISA retirement plans. “Nor does CalSavers interfere with ERISA's core purposes. Accordingly, ERISA does not preempt the California law.”
 
The ruling upholds a federal district court ruling that denied a challenge to the program and marks the first time a federal appeals court has ruled on whether ERISA covers state-run IRAs. The Howard Jarvis Taxpayers Association (HJTA) mounted the challenge.
 
"Nothing in law supports HJTA's effort to recast ERISA's preemption provision as a sword that would allow employers who do not offer their own retirement plans to thereby deprive their employees of the ability to participate in a state-run IRA savings program," Circuit Judge Daniel Bress wrote.
 
The opinion also rejected HJTA's argument that CalSavers nonetheless “competes with” ERISA plans and will “frustrate, not encourage the formation of” ERISA plans. “Even if this were true, it does not matter,” Judge Bress wrote. “The Supreme Court has been clear that ‘ERISA does not pre-empt' state laws that ‘merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.'”
 
California employers that do not offer retirement savings plans are required to enroll their workers automatically in CalSavers. The program set the default payroll deduction at 5% of an employee's pay. Employees may increase or reduce the contribution, or opt out altogether.



 

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