Jarvis Appeals CalSavers Decision

An ERISA preemption challenge to the CalSavers Retirement Savings Program is gearing up for another go at it.

 

The Howard Jarvis Taxpayers Association has filed a notice in Howard Jarvis Taxpayers Ass’n. v. Calif. Secure Choice Ret. Sav. Program, E.D. Cal., No. 2:18-cv-01584, notice of appeal 4/1/20) announcing its appeal of a decision last month which held that that the Golden State’s auto-IRA program for private sector workers is neither an employee benefit plan nor does it relate to an ERISA plan, and therefore was not preempted by ERISA.

 

The original suit, filed in the U.S. District Court for the Eastern District of California in 2018 by the Howard Jarvis Taxpayers Association, Jonathan Coupal and Debra Desrosiers (“as non-governmental employees and California taxpayers), claimed that the California Secure Choice Retirement Savings Trust Act “violates the Supremacy Clause of the United States Constitution because it is expressly preempted by the Employee Retirement Income Security Act of 1974…” Without this preemption, the suit claims that “…such non-governmental employees’ funds will have none of the ERISA protections intended for them by the federal government since 1974.” Consequently, the plaintiffs had asserted that CalSavers is “ultra vires” (beyond the powers), and seek a declaration that CalSavers is “void.”

That suit had been dismissed with a leave to amend—amended and refiled, the plaintiffs’ argument that ERISA preempted CalSavers was supported by the Department of Justice, but when the district court reconsidered the refiled arguments that it had already heard—well, nothing changed.

 

Appealing is one thing; winning is another—but it’s perhaps worth recalling the Department of Justice’s argument that, “A state law may not reference ERISA plans in order to trigger ERISA-equivalent coverage. Because the Secure Choice Act does exactly that, this Court should determine that the law is preempted on that basis,” according to their filing in support of the Jarvis suit. 

 

At that time the government explained that the traditional criteria for establishing where preemption would not apply were that: (1) the employer makes no contributions; (2) employee participation is “completely voluntary”; (3) the employer does not endorse the program and acts as a mere facilitator of a relationship between the IRA vendor and employees; and (4) the employer receives no consideration except for its own expenses”—but since, in the federal government’s assessment, “CalSavers’ automatic-enrollment IRAs are not ‘completely voluntary,’ they are not exempt from ERISA within the 1975 IRA Safe Harbor.” 

 

We’ll see what the appellate court makes of those arguments.