A taxpayer lobbying organization sued to halt implementation of the California Secure Choice Retirement Savings program, a new state defined contribution plan for private-sector workers that do not have access to a tax-favored retirement plan.
The Howard Jarvis Taxpayers Association filed the suit in U.S. District Court in Sacramento, naming as defendants the program and California state Treasurer John Chiang, chairman of the California Secure Choice Retirement Savings Investment Board, which administers the program.
The complaint seeks a declaration by the court that the state law creating the CalSavers plan is preempted by the Employee Retirement Income Security Act. It also seeks to permanently stop program officials "from wasting taxpayer funds by further implementing CalSavers," the complaint said.
California's pilot program could start its three-year rollout at the end of the year and target the largest employers once it's underway. No implementation dates have been set.
"For an organization which styles itself as a champion of taxpayers, the Howard Jarvis Taxpayers Association shockingly fails to recognize that if we don't help our citizens build a nest egg with their own money, they will ultimately become wards of the state wholly dependent on public assistance for their most basic needs," Mr. Chiang said in a written statement.
Some 6.8 million California workers currently do not have access to a retirement plan.
Mr. Chiang added that state officials "remain undaunted, undistracted and unwavering in our commitment to successfully launch" the program aimed at helping private employees save for retirement without "putting either businesses or taxpayers on the hook."
Separately, the California Secure Choice Retirement Savings Investment Board issued an RFP for program administrator and investment manager services for the savings program, said Katie Selenski, CalSavers' executive director.
Mr. Chiang and other program officials have not yet been served with the complaint, said John Wark, Mr. Chiang's spokesman.
Last month, the board selected five investment options for the program: a capital preservation fund benchmarked to three-year U.S. Treasury bonds; a core bond fund; a global equity fund; a suite of target-date or target-risk funds; and an environmental, social and governance fund, according to the plan's investment policy statement and the RFP.
The automatic default is expected to be either the target-date or target-risk funds, with the first $1,000 of a participant's contributions directed to the capital preservation fund, the RFP said.
Responses to the RFP are due 4 p.m. PDT July 17. Selections could be made as early as the week of Aug. 27, with the contract starting in September. Consultants AKF Consulting and Meketa Investment Group are assisting. The RFP is available on California state treasurer's website.
Arleen Jacobius is a reporter at InvestmentNews' sister publication, Pensions&Investments.