The Justice Department has submitted a Statement of Interest in the litigation, Howard Jarvis Taxpayers Association et al v. CA Secure Choice Retirement Savings Program, challenging California’s CalSavers mandated payroll deduction IRA program, as preempted by ERISA.  The Department previously asked the District court to refrain from ruling on the pending motion to dismiss until it decided whether to participate.  See U.S. Asks California Court to Delay CalSavers Decision Again.  The Department filed the Statement on September 13, 2019, for the purpose of advancing a correct and uniform interpretation of the extent of ERISA’s preemption and to promote the voluntary establishment of employer-sponsored retirement plans.  The Department stated that the United States has a heightened interest in the court finding that the California Secure Choice Act, which authorized the CalSavers program, is preempted by ERISA because it is among the first of similar state laws being challenged.

In the Statement, the Department maintains that CalSavers is preempted by ERISA because ERISA plans are necessary to its framework and it forces employers to either maintain an ERISA plan or to participate in CalSavers.  Additionally, the Department maintains that the CalSavers program itself creates an administrative scheme that employer’s must follow if not maintaining an ERISA plan.  Therefore, the CalSavers program as maintained by any one employer is an ERISA-covered plan.  From the statute’s terms a reasonable person can determine the intended benefits, beneficiaries, source of funding, and procedures for receiving benefits.  Therefore, CalSavers is a plan, fund, or program under Supreme Court and Ninth Circuit precedent, the Department maintains.  Additionally, by requiring employers in the program to determine whether an employee is eligible, set up payroll deduction arrangements, ensure employees are enrolled, deduct contributions through payroll, and forward them to CalSavers, the statute mandates employers maintain an ongoing administrative program required for an ERISA plan under the Supreme Court’s Fort Halifax, 482 U.S. 1 (1987), decision.

The Department also rejects CalSaver’s position that even if the IRAs under the program are ERISA plans, they are exempt under the 1975 Safe Harbor, maintaining that the program is not “completely voluntary.”  The Department noted that other cases involving such wording have held that automatic enrollment, even with an opt out is not completely voluntary.

The Department also maintains that the statute is preempted by ERISA for having an impermissible connection with ERISA-covered plans because it governs a central matter of plan administration and requires employers who do not have ERISA plans to maintain an ERISA-covered plan and the statute controls the benefits, design, and administration of the mandated plan.  Therefore, the statute interferes with the nationally uniform plan administration at the heart of ERISA preemption and potentially subjects multi-state employers to numerous disparate state retirement plan laws.  Finally, the Department maintains that because the statute forces employers to either adopt an ERISA plan or provide an equivalent through CalSavers, which is ERISA-covered, it is preempted as conflicting with ERISA which merely encourages employer’s to voluntarily adopt retirement plans.

It remains to be seen, what effect, the Department’s position will have on the District Court’s ruling.