Taxpayers Association Seeks Supreme Court Review of ERISA Pre-emption Case

The plaintiffs in the case believe California should not be permitted to operate the CalSavers Retirement Savings Program on the grounds that its establishment violates federal ERISA pre-emption rules—claims rejected by both a district and an appellate court.

Nearly six months after the 9th U.S. Circuit Court of Appeals rejected their lawsuit, the plaintiffs in an Employee Retirement Income Security Act (ERISA) pre-emption lawsuit have petitioned the U.S. Supreme Court to take up their case.

The lawsuit, filed by the Howard Jarvis Taxpayers Association, sought to block the CalSavers Retirement Savings Program on the grounds that the ERISA, a piece of federal legislation, pre-empts CalSavers, therefore invalidating the program. These claims were previously rejected by both the 9th Circuit and the District Court for the Eastern District of California.

In its dismissal earlier this year, the appellate court found that ERISA does not pre-empt CalSavers in the way the plaintiffs suggest. In summary, the court’s logic was that CalSavers is not an ERISA plan because it is established and maintained by the state, not employers. Furthermore, 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, the court ruled, concluding for all these reasons that ERISA does not pre-empt the California law.

As is the standard procedure in Supreme Court appeals, the appellants early in their petition offer a short and succinct summary of their legal question: “Considering California’s infamous record of mismanagement, corruption and the cavernous underfunding of its public employee retirement systems, is California permitted under federal law (ERISA) to now require private employers to automatically debit employee paychecks and surrender those earnings to the state to manage as ‘retirement savings,’ despite the state expressly disclaiming any fiduciary accountability, and despite Congress having exercised its authority under the Congressional Review Act to veto a Department of Labor [DOL] regulation that briefly carved out an ERISA safe harbor for such state-run automatic retirement savings plans?”

The last part of the question refers to actions the DOL took between 2015 and 2017. In short, the DOL under former President Barack Obama first crafted a rule that would provide a pathway for states like California to create retirement savings programs that would not be subject to all the normal rules and requirements put on private employers under ERISA. President Donald Trump’s administration later did away with this “safe harbor” rule.

The Howard Jarvis Taxpayers Association’s appeal to the Supreme Court includes various arguments to the effect that, once in state hands, participant employees’ money will not have the security that Congress intended.

“[Participant assets] will not be protected by any fiduciary duty or contractual liability, but will be at risk under a statute that expressly disclaims any responsibility for loss,” the appeal alleges.

The full text of the appeal is available here.