Supreme Court Declines Review of ERISA Preemption Challenge to CalSavers

On February 28, 2022, the US Supreme Court declined to review the appeal of a challenge to California’s mandated payroll deduction IRA program, CalSavers. The plaintiff, the Howard Jarvis Taxpayers Association, requested the review. The plaintiff asserted that ERISA preempted the state law. The plaintiff also argued that the California law conflicted with ERISA’s structure and stripped employers of ERISA’s protections. The federal district court and the Ninth Circuit Court of Appeals had each dismissed the plaintiff’s claims.

CalSavers requires certain employers that do not offer a retirement plan to employees to automatically deduct 5% of pay for employees and pay it to CalSavers, which would invest those funds in Roth IRAs. However, employees can opt out or change the deduction amount or investment to a traditional IRA. It is one of several similar state-initiated retirement programs.

On May 6, 2021, the Ninth Circuit affirmed a lower court decision that ERISA does not preempt the CalSavers program. The Ninth Circuit found that California created and administered CalSavers. Since ERISA regulates plans established or maintained by an employer, the court held that CalSavers was not subject to ERISA. Additionally, in the court’s view, CalSavers does not regulate ERISA plans and does not require any employers to alter or provide ERISA benefits.

The Supreme Court’s denial effectively ends the ERISA preemption challenges to the CalSavers program (and likely similar state-initiated programs). Nevertheless, affected employers should be aware of this development and be prepared to satisfy the CalSavers program requirements.

Supreme Court Declines Review of ERISA Preemption Challenge to CalSavers »