Howard Jarvis Taxpayers Ass'n v. Cal. Secure Choice Ret. Sav. Program

Howard Jarvis Taxpayers Ass'n v. Cal. Secure Choice Ret. Sav. Program

Opinion

 [*852]  BRESS, Circuit Judge:

This case presents a novel and important question in the law governing retirement benefits: whether the federal Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq., preempts a California law that creates a state-managed individual retirement account (IRA) program. The program, CalSavers, applies to eligible employees of certain private employers in California that do not provide their employees with a tax-qualified retirement savings plan. Eligible employees are automatically enrolled in CalSavers, but may opt out. If they do not, their employer must remit certain payroll deductions to CalSavers, which funds the employees' IRAs. California manages and administers the IRAs and acts as the program fiduciary. Citing a need to encourage greater savings among future retirees, other States have [**4]  enacted similar state-managed IRA programs in recent years. To our knowledge, this is the first case challenging such a program on ERISA preemption grounds.

We hold that the preemption challenge fails. CalSavers is not an ERISA plan because it is established and maintained by  [*853]  the State, not employers; it does not require employers to operate their own ERISA plans; and it does not have an impermissible reference to or connection with ERISA. Nor does CalSavers interfere with ERISA's core purposes. ERISA thus does not preclude California's endeavor to encourage personal retirement savings by requiring employers who do not offer retirement plans to participate in CalSavers. We therefore affirm the judgment of the district court.

In 2017, the California Legislature enacted the CalSavers Retirement Savings Trust Act, which implemented the CalSavers program (previously known as "California Secure Choice"). See Cal. Gov't Code § 100000, et seq. CalSavers is a state-run IRA savings program for certain private employees. See id. §§ 100002, 100004, 100008. Its objective is to encourage greater retirement savings among employees whose employers do not offer retirement plans. See Savings Arrangements Established by States for Non-Governmental Employees, 81 Fed. Reg. 59464, 59464-65 (Aug. 30, 2016) (describing how California and other states have enacted "automatic [**5]  enrollment" programs to "encourage employees to establish tax-favored IRAs funded by payroll deductions").

] CalSavers's automatic enrollment requirement applies only to an "Eligible employee" of an "Eligible employer." Cal. Gov't Code §§ 100000(c)-(d), 100032. Eligible employees are defined as California employees who are at least eighteen years old and employed by an eligible employer. Id. § 100000(c); Cal. Code Regs. tit. 10, § 10000(l), (n). Eligible employers are defined as non-governmental employers with five or more employees in California. Cal. Gov't Code § 100000(d); Cal. Code Regs. tit. 10, § 10000(m). The sole exclusion is for an "Exempt Employer," Cal. Code Regs. tit. 10, § 10000(q), that provides either an "employer-sponsored retirement plan" or an "automatic enrollment payroll deduction IRA" that "qualifies for favorable federal income tax treatment." Cal. Gov't Code § 100032(g)(1).

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