Supreme Court refuses to hear challenge to CalSavers

A California law that creates state-managed individual retirement accounts for workers survived a challenge by the Howard Jarvis Taxpayers Association, the U.S. Supreme Court ruled Monday.

The court denied a petition by the taxpayer group arguing that the law, which allows automatic deductions of employee paychecks, is preempted by the Employee Retirement Income Security Act of 1974, or ERISA.

The decision upholds a 9th U.S. Circuit Court of Appeals ruling that rejected the taxpayer group's challenge to the state-managed program known as CalSavers.

While the taxpayer group has lost in its challenge each step of the way, Supreme Court justices did ask the state to file a brief defending the law. Howard Jarvis Taxpayers Association et al. v. California Secure Choice Retirement Savings Program et al., 21-558 (S. Ct., filed Oct. 12, 2021).

California State Treasurer Fiona Ma hailed the court decision in a statement. CalSavers is a simple solution to level the playing field for workers who for too long haven't had effective access to retirement savings plans," Ma wrote. "Without this program, and programs like it across the country, millions of Americans would be left behind."

Laura E. Dougherty, a staff attorney with the taxpayers' group, argued that a 2017 vote by Congress repealing a Department of Labor regulation declaring state-run employee savings plans exempt from ERISA doomed California's CalSavers program.

In a decision last May, 9th Circuit Judge Daniel A. Bress, an appointee of President Donald Trump, wrote that there is a debate among policymakers over the creation by cities and states of retirement savings programs and whether that involves government too much in private decision-making. But he didn't agree with Dougherty's arguments that CalSavers should be preempted under federal law.

"CalSavers is not an ERISA plan because it is established and maintained by the state, not employers," Bress wrote for the panel.

Dougherty wrote in an email Monday that the taxpayer association was disappointed the high court did not accept the case.

"It is clear that Congress intended to protect their workplace retirement savings with ERISA's nationally uniform fiduciary standards, something the CalSavers IRA program expressly declines to provide," she wrote.

"Given the State of California's track record at managing its public employee pensions, we are in no way hopeful regarding the new dawn of the state managing private pensions too," Dougherty added.

The intent of CalSavers is to give employees an easier way to save for retirement, although workers must choose to opt out if they do not want money taken out of their paychecks.

Deputy Solicitor General Joshua A. Klein, who defended the law and could not be reached for comment Monday, wrote in a reply brief that the taxpayer group raised a number of policy objections, including the burden on employers.

"The courts below decided only that Congress has not 'outlawed' CalSavers under ERISA's existing text, ... and petitioners' policy criticisms do not show that the lower courts' unanimous conclusion on that question was incorrect," he added.