Lawsuit Seeks to Halt Rollout of California Secure Choice Savings

The Howard Jarvis Taxpayers Association wants a federal district court to halt the program, based on ERISA preemption and the possibility that home-owning Californians could be called on to pay additional taxes to support Secure Choice, which aims at opening up retirement investing opportunities.

The Howard Jarvis Taxpayers Association (HJTA) has filed a complaint in the United States District Court for the Eastern District of California—on behalf of itself as a non-governmental employer and on behalf of its members as non-governmental employees, non-governmental employers, and California taxpayers—to halt the ongoing implementation of the California Secure Choice Retirement Savings Trust Act.

According to its supporters, the California Secure Choice Retirement Savings Program is meant to provide a voluntary, low-risk, auto-enrollment retirement savings plan for many uncovered workers in the state who would otherwise have little opportunity to start saving in a constructive way. According to detractors, such as HJTA, the program will most likely prove to be an expensive experiment that does little to actually improve retirement savings adequacy in the state. 

Named as defendant is the California Secure Choice Retirement Savings Program and John Chiang in his official capacity as the chair of the California Secure Choice Retirement Savings Investment Board. According to the text of the complaint, the act that created the Secure Choice program “violates the Supremacy Clause of the United States Constitution because it is expressly preempted by the Employee Retirement Income Security Act of 1974.”

“ERISA establishes nationally uniform standards to protect private employees and does not allow state-run retirement programs for private employees,” the complaint states. “Without preemption of CalSavers, such non-governmental employees’ funds will have none of the ERISA protections intended for them by the federal government since 1974. CalSavers is thus ultra vires, and HJTA seeks a declaration that CalSavers is void.”

HJTA further seeks injunctive relief under California Code of Civil Procedure Section 526a “to enjoin the waste of taxpayer funds on implementation costs under way.”

The filing of the compliant comes less than a year after the Trump administration and Congress cancelled an ERISA safe harbor established by the Obama administration, which was meant to prevent this very pre-emption issue. By issuing a new final rule, “Definition of Employee Pension Benefit Plan Under ERISA,” the Department of Labor’s (DOL)’s Employee Benefit Security Administration (EBSA) removed its final rules regarding the Employee Retirement Income Security Act (ERISA) safe harbor of government-run plans for private-sector workers from the Code of Federal Regulations.

Along some other lines of argument, HJTA suggests the fact that the U.S. Congress has expressly disavowed these types of savings arrangements established by States for non-governmental employees, means there is “no potentially valid DOL regulation permitting this state-run retirement arrangement.”

“The nationally uniform application of ERISA requires that this Court declare CalSavers void,” the group concludes.

Full text of the complaint is available here.