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FAIRFIELD-SUISUN, CALIFORNIA
Television news trucks line up outside of the 9th U.S. Circuit Court of Appeals building September 22, 2003 in San Francisco, California. (David Paul Morris/Getty Images/TNS)
US appeals court upholds California program for workers without retirement benefits
A federal appeals court on Thursday upheld a California program that provides retirement savings accounts to workers whose employers don’t offer them.
A three-judge panel of the U.S. 9th Circuit Court of Appeals decided unanimously that the program, CalSavers, did not interfere with federal law.
The state established CalSavers in 2017 to encourage savings for future retirees. Private workers whose employers do not provide pensions or 401(k) programs were automatically enrolled in CalSavers. Unless workers opt out, their employers are required to remit money from payroll deductions to CalSavers to be deposited in IRAs set up on the employees’ behalf.
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But the court said CalSavers did not interfere with the goals of the U.S. Employee Retirement Income Security Act of 1974.
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,” Judge Daniel A. Bress, a Trump appointee, wrote for the panel.
The anti-tax group argued that the federal law, which established minimum standards for pensions, barred California from creating CalSavers. Laws passed by Congress are generally controlling over state law and prevent states from enacting measures on the same subject.
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On March 10, 2021, the U.S. Department of Labor (the “DOL”) issued a statement that it intends to revisit its final rules issued late last year on “Financial Factors in Selecting Plan Investments” (summarized here) and “Fiduciary Duties Regarding Proxy Voting and Shareholder Rights” (summarized here), which some viewed as restricting “do-good” or “ESG” investing by investors subject to the U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The DOL further stated that, until it issues further guidance, the DOL will not enforce either rule or otherwise pursue enforcement actions against any ERISA plan fiduciary based on a failure to comply with those final rules with respect to an investment (including a “Qualified Default Investment Alternative” offered under a 401(k)- or 403(b)-type plan) or investment course of action or with respect to an exercise of shareholder righ
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