How Should Congress Respond to Jarvis? The Case for Letting States Experiment With Private Sector Retirement Savings Plans

Abstract

The U.S. Supreme Court has ended the saga of Howard Jarvis Taxpayers Association v. California Secure Choice Retirement Savings Program by declining to review the decision of the U.S. Court of Appeals for the Ninth Circuit. By refusing to review this circuit court decision, the Supreme Court left intact that decision and its holding that ERISA does not block the CalSavers IRA program.

In the wake of these events, some urge the federal government to move into the space occupied by CalSavers and other state programs encouraging less affluent Americans to save for retirement. I instead propose that, the post-Jarvis world, Congress should eschew any mandate that private employers adopt IRAs or other retirement programs for their employees. The states should continue to experiment in this area rather than the federal government imposing a single national pattern. Different states will pursue different courses, thereby testing alternative possibilities. Experimentation by the states will provide information about diverse approaches.

To facilitate such experimentation by the states, the federal government should clarify two legal issues concerning state-run retirement programs for the private sector. First, employers covered by state-administered IRA programs should be permitted to make supplemental contributions to their employees’ IRAs without such employer contributions converting the state IRA program into an ERISA-governed arrangement. Second, employers not required by state law to participate in a state retirement plan for private sector employers should be allowed to voluntarily elect participation without such voluntary participation triggering ERISA coverage for the state plan.

Keywords: CalSavers, state-run private sector retirement programs, Roth IRA, 401(k), defined benefit pensions, Howard Jarvis Taxpayers Association v. California Secure Choice Retirement Savings Program, ERISA, fiduciary duties, preemption, employee benefit plan, multiple employer plans, national uniformity