Connecticut is one of five states that, in recent years, has implemented an “auto-IRA” program, in which private employers automatically deduct a set amount from their employees’ paychecks and contribute that amount to an individual retirement account established through the state system. The Connecticut Retirement Security Exchange (the “Exchange”), along with similar programs in California, Oregon, Maryland and Illinois, have been subject to speculation that they are invalid under the Employee Retirement Income Security Act (“ERISA”), the federal law that pre-empts state regulation of employee benefit plans. On March 29, 2019, a federal judge dismissed a pre-emption claim against California’s auto-IRA program (“CalSavers”), handing down a decision that sets a favorable precedent for all of the states.
Acknowledging that the case against CalSavers presented novel legal issues, the California district court judge held that the auto-IRA program does not force employers to change their existing ERISA plans, so it is not pre-empted. Furthermore, because CalSavers enhances retirement security for those who may not otherwise have access to a plan, it comports with ERISA’s stated intent.
Although the California decision is not binding authority in Connecticut, the judge’s reasoning may be instructive if similar claims were made against the Exchange. This is a welcome development for the Connecticut Retirement Security Authority, as it plans for a phased roll-out of the auto-IRA program later this year.