On March 10, 2020, the United States District Court for the Eastern District of California once again dismissed the lawsuit by the Howard Jarvis Taxpayers Association (HJTA), challenging CalSavers as being preempted by ERISA. CalSavers is California’s mandated auto-enrollment payroll deduction IRA program that requires employers of a certain size, that don’t provide their employees with a retirement plan, to automatically withhold contributions from such employee’s pay and pay them into IRAs managed by CalSavers. Employees can opt out.
HJTA originally filed suit in May of 2018, alleging that the program was preempted by ERISA. However, the court granted CalSavers’ motion to dismiss in March of last year but gave HJTA leave to amend the complaint. HJTA filed an amended complaint in April of 2019 and CalSavers again moved to dismiss. The District Court again dismissed the case despite the fact that the United States Department of Labor filed a statement of interest last September, siding with HJTA that the law was preempted by ERISA. The court found that CalSavers is not an employee benefit plan under ERISA because it is not maintained by an employer and it does not “relate to” an employee benefit plan because it does not impose any additional reporting, administration, or burdens on employers that maintain ERISA plans.
This case is not only a victory for CalSavers but also other states with similar programs.