SCOTUS Scuttles CalSavers Challenge

Despite a request—and an apparent consideration of that request—the nation’s highest court has decided not to take on a case challenging the CalSavers state-run IRA program for private sector workers.

The original suit, filed in the U.S. District Court for the Eastern District of California in 2018 by the Howard Jarvis Taxpayers Association, 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 asserted that CalSavers is ultra vires (beyond the powers), and sought a declaration that CalSavers is “void.”

That suit was dismissed with a leave to amend—and 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. So the plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit. The Trump Labor Department joined that appeal with a “friend of the court” brief in June 2020, stating that it had an interest in “whether state laws are preempted, properly interpreting the extent of preemption to delineate the roles of federal and state authority over the establishment or maintenance of employment-based retirement plans, and maintaining uniform national standards for plan administration”—an interest it described as “heightened” in this case “because the Act is among the first of several similar state laws.”

Or that was the Department’s stance until February 2021, when the Biden Labor Department, citing the “change in administration,” said that the Acting Secretary of Labor had “reconsidered the matter and hereby notifies the Court that he no longer wishes to participate as amicus in this case and that he does not support either side.” That was followed by a Ninth Circuit decision in May 2021 determining that CalSavers was not preempted by ERISA—leaving the plaintiffs to seek review by the nation’s highest court. 

Then last November, the Supreme Court reached out to CalSavers and California Treasurer Fiona Ma (“in her Official Capacity as Chair of the California Secure Choice Retirement Savings Investment Board”) for a response to the HJTA’s Oct. 12 petition for a writ of certiorari. 

That said, and despite the arguments made,[1] the nation’s highest court has now “denied certiorari”—i.e., basically declined to review the case—which leaves the decision of the lower court[2]—and CalSavers[3]—intact.  

Footnotes

[1] “Here, California is inserting itself into this federally preempted field and imposing its own mandates and rules that conflict with ERISA’s structure. This strips both employers and employees of their rights under federal law.”

[2] The Ninth Circuit ruling stated: “We hold that the preemption challenge fails. CalSavers is not an ERISA plan because it is established and maintained by the State, not employers; it does not require employers to operate their own ERISA plans; and it does not have an impermissible reference to or connection with ERISA. Nor does CalSavers interfere with ERISA’s core purposes. Accordingly, ERISA does not preempt the California law.”

[3] “It’s great that this matter is finally behind us after nearly four years, but we never let it slow us down,” said Executive Director Katie Selenski in a press release. Selenski reported that more than 30,000 employers have registered since the program launched on July 1, 2019 and more than 233,000 workers are saving with funded accounts amounting to more than $186 million. “We are laser focused on bringing on tens of thousands more employers this year leading up to and following the June compliance deadline and supporting hundreds of thousands more savers as they begin their savings journeys,” Selenski said.