DOL Drops Support for CalSavers Suit

Citing the “change in administration,” the Department of Labor (DOL) has backed off its previous support for a lawsuit challenging the CalSavers Retirement Savings Program.

As recently as last summer, the DOL had affirmed concerns it had with the Golden State’s state-run IRA program for private sector workers and its design preemption with 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, 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 here had asserted that CalSavers is “ultra vires” (beyond the powers), and seek a declaration that CalSavers is “void.”

In its June “friend of the court” brief, the DOL stated that in its opinion, the California Scure Choice Act was preempted under ERISA’s “reference to” doctrine because the existence of an ERISA-covered plan is essential to its operation. More specifically, they noted that in order to comply with the Act, employers either must have an ERISA-covered retirement plan, or must use the CalSavers withholding arrangement. “If they use the withholding arrangements mandated by the Act, they establish or maintain plans, funds, or programs of benefits for their employees which therefore are themselves ERISA-covered plans. The fact that the withholding arrangements are compelled by state law does not alter the ERISA preemption analysis,” they wrote at the time.

The DOL also noted then that the California Secure Choice Act was also preempted under the “connection with” doctrine “because it both governs a central matter of plan administration and interferes with nationally uniform plan administration,” specifically by “subjecting multi-state employers to a patchwork of state laws that directly regulate how employers must structure their program or plan in providing retirement benefits.”

But that, as they say, was then.

In a filing (Howard Jarvis Taxpayers Ass’n v. Cal. Secure Choice Ret. Sav. Program, 9th Cir., No. 20-15591, notice 2/5/21) with the U.S. Court of Appeals for the Ninth Circuit, the Labor Department now notes that, “On June 19, 2020, the Secretary of the U.S. Department of Labor filed an amicus curiae brief in this case supporting plaintiffs-appellants. After the change in administration, the Acting Secretary of Labor has 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.”


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