CalSavers will ultimately require all employers that don't sponsora retirement plan and have five or more employees to enroll workersin the state-administered Roth IRAs by June 30, 2022, (Image:Shutterstock)

CalSavers, California's automatic IRA program for employers thatdo not sponsor a workplace retirement plan, has survived its latestand final challenge in a federal district court in that state.

In 2018, the Howard Jarvis Taxpayers Association, aCalifornia-based non-profit that advocates for fiscal restraint,filed suit against CalSavers, alleging the state plan is anemployee benefits plan and is preempted by the Employee RetirementIncome Security Act, a federal law.

Related: CalSavers lawsuit raises tricky ERISAquestions

CalSavers will ultimately require all employers that don'tsponsor a retirement plan and have five or more employees to enrollworkers in the state-administered Roth IRAs by June 30, 2022, whena phased rollout of the program is completed.

Under the program, employers are not allowed to makecontributions, and eligible workers are automatically enrolled inthe savings plans. Once automatically enrolled, employees can optout.

That design feature—automatic enrollment—is at the core of thecomplaint. An ERISA safe harbor says workplace IRA plans are notemployee benefit plans under the law, so long as participation iscompletely voluntary.

Tuesday's decision in the U.S. Court for the Eastern District ofCalifornia was its second to uphold CalSavers. It previouslygranted CalSavers motion to dismiss the case, but allowed HowardJarvis Taxpayers Association to amend its complaint.

Last year, the Justice Department intervened, requesting thecourt to delay its ruling. Justice ultimately filed a brief infavor of HJTA.

"Because the Secure Choice Act disregards and runs afoul ofERISA's statutory scheme by effectively requiring employers tomaintain such plans, it is preempted by ERISA's broad, expresspreemption provision that disallows any state laws that 'relate toany employee benefit plan'," the Justice Department argued in itsbrief.

The Justice Department argued that CalSavers automaticenrollment provision fails ERISA's safe harbor, and it thereforeconstitutes an employee benefit plan, which is preempted byERISA.

But the District Court found differently.

"The role of actual employers in CalSavers is limited toproviding a roster of eligible employees, providing contactinformation of eligible employees, making payroll deductions, andremitting such deductions," wrote Judge Morrison England.

"Such ministerial duties do not rise to the level of an employeebenefit plan established or maintained by actual employers," addedJudge England.

HJTA did not respond to an inquiry as to its plan to appeal thedecision.

"We are very pleased with the Court's ruling," said CaliforniaState Treasurer Fiona Ma, whose office oversees CalSavers, said ina statement.

"CalSavers is pioneering and building momentum. Workers withoutaccess to a savings program at work are eager to start saving.There is no reason to deny millions of hardworking Californiansaccess to this savings program when the alternative is to see themwork until they drop, or suffer the hardships that come with littleto no savings," added Ma.

So far, CalSavers has enrolled more than 1,500 employers.Employers with more than 100 employees that do not sponsor aretirement plan are required to enroll workers by June 30,2020.

Read more: 

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• OregonSaves auto-IRA off to promisingstart
• Even with Open MEPs, state-IRAs, millions wouldstill be without access to a workplace retirementplan