On Monday, February 28, 2022, the United States Supreme Court refused to accept the appeal of the Ninth Circuit’s dismissal of the Howard Jarvis Taxpayer’s Association’s challenge to California’s mandated payroll deduction IRA program, known as CalSavers.  The Association maintained the state law was preempted by ERISA.  This effectively puts an end to the challenge to CalSavers.  The United States Court of Appeals for the Ninth Circuit previously held the statute was not preempted by ERISA and dismissed the case.  See Ninth Circuit Holds CalSavers Is Not Preempted By ERISA. . . 6/30 Deadline Approaching.

CalSavers requires employers of a certain size that don’t otherwise offer a retirement plan to employees to provide its roster of employees to CalSavers and to automatically deduct 5% of pay for employees  and pay it to CalSavers to be invested in Roth IRAs.  Employees can opt out or change the amount of the deduction and even change the investment vehicle to a traditional IRA.  Many other states have similar programs that would have been in jeopardy if the law was held preempted by ERISA.

It’s important to note that the current threshold for employers having to register with CalSavers is employers with 5 or more employees.  If such employers do not provide a retirement plan and have not registered by June 30, 2022, they will face penalties.  See CalSavers Begins Assessing Penalties-Threshold Number Of Employees Drops To 5 on June 30.  Any employer that was taking a “wait and see” approach to see if the law would be preempted should be taking steps now to adopt a retirement plan or be prepared to register with CalSavers.