The U.S. Court of Appeals for the 9th Circuit on Thursday agreed with a lower court's decision to dismiss a taxpayer association's lawsuit aiming to stop the implementation of the nearly $68 million CalSavers Retirement Savings Program.
CalSavers is a defined contribution plan for private-sector workers in California who do not have access to a retirement plan sponsored by their employers. More than 140,000 individuals already have actively funded accounts, a new release said.
The U.S. District Court in Sacramento, dismissed the Howard Jarvis Taxpayers Association lawsuit on March 10, 2020, without leave to amend. The association had sued to permanently halt the plan's implementation and prevent its board from spending taxpayer money on the CalSavers program, arguing that the state program is pre-empted by federal law.
The San Francisco-based appellate panel disagreed. In an opinion written by Judge Daniel A. Bress, the court said federal law, namely the Employee Retirement Income Security Act of 1974, does not pre-empt the state law that created the plan. CalSavers is established and maintained by the state, not employers, and it does not require employers to operate their own ERISA plans, the opinion said.
Laura Dougherty, staff attorney for the Howard Jarvis Taxpayers Association said in an email that the association is reviewing its options to petition for rehearing or petition the U.S. Supreme Court to review the case.
"CalSavers imposes burdens and risks on private employers since participation is mandatory for most employers who do not offer a company retirement program," Ms. Dougherty said. "CalSavers imposes risks on employees since it doesn't follow federal standards for retirement programs and authorizes commingling with California's already troubled public pension plans."
California Treasurer Fiona Ma, chairwoman of the CalSavers Retirement Savings Board, said CalSavers is "a simple solution to level the playing field for workers who for too long haven't had access to workplace-based retirement plans."
The appellate court's opinion will clarify matters to the extent the case may have caused confusion among a small subset of employers, said Katie Selenski, CalSavers' executive director, in an email.
"But we've been proceeding as planned with a laser focus on onboarding employers, more than 10,000 of whom have already joined," Ms. Selenski said.