Edward A. Zelinsky

Abstract

Half of American workers are not covered by employer-sponsored retirement arrangements. The recently passed California Secure Choice Retirement Savings Trust Act seeks to solve this problem by mandating retirement savings arrangements for California employers, coupled with a public investment vehicle for investing these private retirement savings. The Act is particularly significant because of California’s size and its status as a trendsetter for other states. This Article is the first to examine the important legal questions the Act raises under the Internal Revenue Code and ERISA. Contrary to the drafters’ intent, the savings accounts authorized under the Act do not qualify as individual retirement accounts under the Code; as a result, employees participating in savings arrangements established under the Act will not receive the income tax benefits associated with individual retirement accounts. If the Act were amended to make its accounts individual retirement accounts, it would survive ERISA preemption under New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645 (1995), though not under Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983). Because Travelers is the Court’s more recent and more compelling construction of ERISA preemption, the Act should survive ERISA preemption if amended to create true individual retirement accounts.

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