EDITORIAL: Feds wise to challenge wasteful Calsavers plan

Sep. 27--California has dug a deep hole with the public pension plans that provide taxpayer-backed retirements for government employees. Instead of focusing on reforming those debt-ridden and underfunded systems, state officials instead created a new program, now known as Calsavers, which sticks its nose into the private sector.

Calsavers went into effect in July to help private workers save for their Golden Years. Most private-sector workers should save more for retirement, but this program will do little to realize that goal. In the meantime, it imposes new costs and red tape for businesses. Any company with at least five employees will, within two years, be required to offer a 401(k) program or participate in this state-run version.

Fortunately, the Trump administration has weighed in this month on behalf of a Howard Jarvis Taxpayers Association legal challenge to Calsavers. We generally oppose federal involvement in state matters -- even when our state embraces bad policies -- but there is a legitimate federal role in challenging Calsavers under the federal Employee Retirement Income Security Act, or ERISA.

"ERISA sets forth uniform qualifications for private retirement savings plans, and uniform standards for transferring accounts, processing claims and disbursing benefits," according to the taxpayer group's legal director. The group says Calsavers doesn't meet those standards by leaving employees subject to unnecessary costs and risks, given that there is no federal guarantee for any losses.

Calsavers isn't like a pension fund that imposes unfunded liabilities on taxpayers, but it could leave taxpayers on the hook in some scenarios. Other states are passing similar programs, so the administration's effort could have nationwide implications.

As the Trump administration's U.S. District Court filing explains, "Because CalSavers, unlike ERISA, forces (rather than encourages) employers to have an ERISA-covered pension plan ... it conflicts with ERISA." Furthermore, the federal statute pre-empts Calsavers because it has "its own administrative regime, fiduciary obligations, reporting procedures, and enforcement mechanisms ... ."

Gov. Gavin Newsom accused the administration of waging "war against commonsense laws and policies" and of threatening "the retirement security of millions of low-income California workers." Such hyperbole is at odds with the reality of Calsavers, which will provide only a small amount of savings for California's private workers.

We'll see how the legal challenge unfolds, but there are myriad other problems with Calsavers. Private workers already have many options for saving for retirement. Creating a state-run program that handpicks the investment-fund choices will encourage companies that already offer plans to shift their workers to the state-run program. That could crowd out private retirement investment choices.

As we explained in a June editorial, this idea emerged in 2011 when California was in the midst of a budget crisis, which was driven in part by ballooning pension liabilities. Public sector unions and their political allies feared a public backlash against their generous pensions. So they proposed giving the state's private workers some benefits to head off efforts to trim government pension deals.

Although the fledgling Calsavers is far different than the behemoth public-pension systems, it still is wasteful and redundant. We agree with HJTA President Jon Coupal, who asks, "Why would we give state politicians and bureaucrats access to another pension program?" The state should fix its own pension plans and leave private workers and businesses alone.

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