Judge Finds CalSavers Not Preempted by ERISA

A lawsuit against California’s state-run auto-IRA program has been dismissed by a federal judge.

U.S. District Judge Morrison C. England Jr., in ruling on the question of whether the legislation establishing the CalSavers program is preempted by the Employee Retirement Income Security Act (ERISA), noted first that, per ERISA, it will “supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.” He also noted that an “employee pension plan” is “any plan, fund or program … established or maintained by an employer” that provides retirement income to employees.

The plaintiffs assert that the CalSavers Board and Trust are employers because a “trust” is a “person” who is “acting indirectly in the interest of an employer.” The plaintiffs relied on a previous case in which a judge found that an association of construction employers that created and administered a trust offering health benefits could be an ERISA employer. However, since the CalSavers’ Trust is administered by the state-created board, not a group of employers, England declined to find that the board and trust are “employers” under ERISA.

England also found that actual employers have no discretion in the administration of CalSavers and do not make any promises to employees: Employers simply remit payroll deducted payments to the program and otherwise have no discretion regarding the funds. “The role of actual employers in CalSavers is limited to providing a roster of eligible employees, providing contact information of eligible employees, making payroll deductions and remitting such deductions,” the court order says. “Such ministerial duties do not rise to the level of an employee benefit plan established or maintained by actual employers.”

Turning to the question of whether the state statute establishing the CalSavers program “relate[s] to any employee benefit plan,” England noted that, “While CalSavers applies only when actual employers do not have an existing ERISA or employer-sponsored retirement plan, the program does not interfere with existing ERISA or retirement plans provided by actual employers.” He cited a previous court case that found, “Where a law is fully functional even in the absence of a single ERISA plan, it does not make an impermissible reference to ERISA plans.”

England addressed a reference to a 2016 U.S. Supreme Court decision in Gobeille v. Liberty Mut. Ins. Co., brought up by both the plaintiffs and in a statement of interest filed in the case by U.S. attorneys. In that case, a Vermont statute required health insurers, including ERISA plans, to disclose “payments relating to health care claims and other information relating to health care services” for a state database. The Supreme Court held the statute was preempted by ERISA because the disclosure requirement interfered with the nationally uniform plan administration and regulatory reporting domain of ERISA.

But England said Gobeille differs from the present matter because CalSavers does not impose additional reporting requirements on existing ERISA plans. The information provided by participating employers does not interfere with ERISA’s regulatory domain because reporting is only required where no ERISA or any other employer-sponsored retirement plan exists. “As such, there is no impermissible ‘connection with’ an ERISA plan which results in the preemption of CalSavers,” England concluded.

Unlike the previous time the case was dismissed, England decided that granting the plaintiffs leave to amend would be futile because their first amended complaint “is substantially similar to their original complaint.”