California’s New State-Run Retirement Program Survives Taxpayer Group’s Challenge

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Source: The Sacramento Bee, by Andrew Sheeler

A federal judge on Tuesday dismissed a California conservative tax group’s effort to block the implementation of a state-run financial savings program that was created to help lower-income workers save for retirement.

The judge’s ruling in favor of the CalSavers Retirement Savings Program allows the program to continue operating. The program comes from a 2016 law that that allowed the state to offer a retirement savings plan to people whose employers do not provide pensions or 401(k) plans.

More than 1,500 employers have registered for CalSavers since the program’s launch in 2019, according to Executive Director Katie Selenski.

Employers with more than 100 employees, who do not already have a retirement plan, must register for CalSavers by June 30 of this year, while employers with more than 50 employees have until June 30, 2021, and those with at least five employees have until June 30, 2022.

“We are very pleased with the Court’s ruling,” California State Treasurer Fiona Ma said in a statement. “CalSavers is pioneering and building momentum. Workers without access to a savings program at work are eager to start saving. There is no reason to deny millions of hardworking Californians access to this savings program when the alternative is to see them work until they drop, or suffer the hardships that come with little to no savings.”

The lawsuit was brought by the Howard Jarvis Taxpayers Association, which argued the program violates a federal consumer protection law that sets standards for retirement plans offered by employers. The federal law is the Employee Retirement Income Security Act, or ERISA.

Judge Morrison England, of the U.S. District Court for the Eastern District of California, rejected that argument, stating that, “In sum, the Court finds that CalSavers is neither an employee benefit plan nor does it relate to an ERISA plan.”

A representative for the Howard Jarvis Taxpayers Association said that the organization “finds it odd” that the judge’s analysis didn’t include a response to a brief filed by the U.S. Department of Justice, which agreed with the taxpayer association’s argument.

“(Howard Jarvis Taxpayers Association) will appeal to the Ninth Circuit (Court of Appeals) and is confident about its prospect on appeal,” a spokeswoman said in a statement.

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Last Updated 08/04/2020

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