CalSavers not preempted by US law, circuit panel says

A federal appellate panel has rejected a taxpayer group's attempt to prevent the state government from offering retirement accounts for workers.

The 9th U.S. Circuit Court of Appeals ruled Thursday the federal Employee Retirement Income Security Act of 1974, or ERISA, does not preempt a California law that creates a state-managed individual retirement account program, known as CalSavers.

9th Circuit Judge Daniel A. Bress, an appointee of President Donald Trump, said the lawsuit by the Howard Jarvis Taxpayers Association was the first to challenge a program like CalSavers on ERISA preemption grounds.

"CalSavers is not an ERISA plan because it is established and maintained by the state, not employers," Bress wrote. Howard Jarvis Taxpayers Association v. California Secure Choice Retirement Savings Program, 2021 DJDAR 4459 (9th Cir., May 6, 2021).

Bress' opinion, which was joined by other members of the panel, affirmed a decision in the state's favor by Senior U.S. District Judge Morrison C. England Jr. of the Eastern District of California.

Laura E. Dougherty, an attorney with the taxpayers' group, told the panel during oral arguments in February that a 2017 vote by Congress repealing a Department of Labor regulation declaring state-run employee savings plans exempt from ERISA doomed CalSavers.

Bress, however, said repeal of the regulation does not address whether ERISA preempted the state law.

Other states and cities have also established retirement savings programs in recent years. Bress wrote there is a debate about whether this is the right approach or if critics are right in saying state-run programs give governments too much of a role in private decision-making and put too much of a burden on employers.

"But these are issues for California's lawmakers and those who elect them, or for Congress should it choose to take up this issue," he added. "The question for us is whether Congress has already outlawed CalSavers."

The answer, Bress concluded, is it has not done so.

Deputy Attorney General Sharon L. O'Grady defended the program on behalf of the state.

Dougherty could not be reached for comment Friday about whether the taxpayer group would seek en banc review of the three-judge panel decision.