The Ninth U.S. Circuit Court of Appeals on Friday upheld a lower court ruling in favor of the California Secure Choice Retirement Savings program, or CalSavers.
The state-run retirement program provides coverage for employees whose employers do not offer a retirement plan and is not preempted by the Employee Retirement Income Security Act of 1974 (ERISA), according to the court.
The state of California created CalSavers in 2017 as way to create retirement funds for workers that are not offered a 401(k) or pension plan by their employer. Any employer in the state with 100 or more employees must contribute 2% to 5% of an employee’s paycheck to CalSavers; the monies collected are then placed in an IRA in the employee’s name.
The state, and not the employer, manages the savings. For that reason, the court ruled that CalSavers is not an ERISA plan.
“The federal law does not preclude California’s endeavor to encourage personal retirement savings by requiring employers who do not offer retirement plans to participate in CalSavers,” said Judge Daniel A. Bress writing for the three-judge panel.
The AARP applauded the ruling, stating that it ensures retirement savings for all Californians and also paves the way for other states’ work-and-save programs. The organization claims that programs such as CalSavers are some of the most important to help Americans without workplace retirement plans build savings and a more secure future. Workplace retirement plans help people save money needed later on to be able to afford long-term care or other necessities.
According to an AARP press release, more than 30 states are looking at work-and-save options or considering legislation to create one. California, Illinois and Oregon are ahead of the others, with more than $220 million in assets under management to date. Colorado, Connecticut, Maryland, New Jersey and Virginia have passed legislation to implement work-and-save programs that have not launched yet. New York, Washington State, New Mexico, Massachusetts and Vermont have passed variations of work-and-save programs.
“CalSavers is a simple solution to level the playing field for workers who for too long haven’t had access to workplace-based retirement plans,” California Treasurer Fiona Ma in a statement after the court’s ruling.
