Court dismisses challenge to CalSavers Secure Choice program

A U.S. District Court in California dismissed a lawsuit challenging CalSavers Retirement Savings program.

The CalSavers program is a defined contribution plan for private-sector workers in California who do not have access to a retirement plan sponsored by their employers.

The Howard Jarvis Taxpayers Association alleged that the Employee Retirement Income Security Act preempts the CalSavers program. The taxpayer association had sought a permanent injunction banning the program and its board from spending taxpayer money on the CalSavers program.

"Eligible employers are required to adhere to the administrative requirements of CalSavers, but because the program only applies to employers without existing retirement plans, no ERISA plans are 'governed' or 'interfered' with because of the statute," according to the March 28 court opinion. "Finding that ERISA preempts CalSavers would be out-of-step with the underlying purposes of the act. CalSavers does not govern a central matter of an ERISA plan's administration, nor does it interfere with nationally uniform plan administration."

But the court gave the taxpayers association one final leave to amend its complaint.

"The court is very aware of the importance of this case and considered granting this motion without leave to amend. However, notwithstanding the court's concern, allowing one final opportunity to amend may be in the parties' best interest," U.S. District Judge Morrison C. England Jr. wrote in the opinion.

The plaintiffs have 20 days to amend their complaint. If they fail to do so, the case will be dismissed without leave to amend, the court ruled.

"We are pleased with the Court's ruling," said California state Treasurer Fiona Ma, whose office oversees the new CalSavers program. "There are 7 million to 8 million workers in California who are not offered a retirement savings option by their employers."

"We are disappointed," said Laura Murray, senior staff attorney for the Howard Jarvis Taxpayers Association.

"It's surprising that the court does not view CalSavers ... is in conflict with federal law. It creates a problem, especially for small employers."

Howard Jarvis Taxpayers Association officials are currently deciding whether the association will amend its complaint or appeal the court's ruling to the Ninth Circuit Court of Appeals, Ms. Murray said.