When Do State Laws Determine ERISA Plan Benefit Rights?
256 Pages Posted: 22 May 2014 Last revised: 8 Jun 2020
Date Written: May 7, 2014
The article supplements the two classic legislative histories of ERISA: (1) James A. Wooten, the Employee Retirement Income Security Act of 1974 — A Political History (2004) and (2) Staff of S. Comm. on Labor and Public Welfare, Leg. History of the Employee Retirement Income Security Act of 1974 (1976). The article, however, also focuses on the development and evolution of the ERISA preemption principles in interpretations of the Supreme Court, and the major amendments to ERISA, particularly the Retirement Equity Act of 1984. The article seeks to give the reader the tools to reaches his or her own conclusions about the issues discussed, particularly the significance of the ERISA General Preemption Rule (the "Rule" that ERISA preempts all state laws that relate to any ERISA plan, and the explicit and implicit exclusions from the Rule. Thus, the reader may answer the essential question that arises about any federal preemption provision for ERISA preemption. What undue interference with the ERISA regulatory regime does ERISA preemption seek to prevent, and which interference is, in fact, prevented?
The article proposes that three principles may be used to decide when state benefit laws determine ERISA benefit rights. First, ERISA permits state laws that do not diminish or enhance (a) ERISA benefit entitlements; (b) ERISA enforcement mechanisms; or (c) ERISA mandates. Second, ERISA preempts any state law that diminishes or enhances any of these ERISA protections unless the diminution or enhancement was needed to implement a state law that is not otherwise preempted, in which case the law is not preempted if the diminution or enhancement is limited to the extent needed for the effective administration of such state law. Third, a law is not otherwise preempted if the law (1) is described in an implicit or explicit exclusion from the ERISA General Preemption Rule, or (2) does not diminish or enhance any of the three above benefit protections other than with a reporting or disclosure mandate that is used to implement the law. Neither the courts nor other commentators have thoroughly explored these principles.
The article applies these three principles to five kinds of state laws:
(1) generally applicable criminal laws, which are explicitly excluded from the Rule;
(2) tax laws, which are explicitly included in the Rule, but to a large extent are implicitly excluded from the Rule;
(3) creditor laws, which are explicitly and implicitly preempted by specific provisions of ERISA, unless plan terms provide for their inclusion, as may be done, to some extent, for certain plans;
(4) domestic relations laws, some of which are explicitly excluded from the ERISA General Preemption Rule, and some of which are implicitly included in the Rule; and
(5) transfer on death laws, all of which ERISA preempts, unless plan terms provide for their inclusion, as may be done, to some extent, for certain plans.
The article also discusses (1) the definition of a plan for purposes of determining whether an arrangement is an ERISA plan; and (2) the extent to which ERISA, the Employee Retirement Income Security Act of 1974, as amended, whose dominating purpose is the protection of ERISA plan participants and beneficiaries rather than the protection of ERISA plans and their sponsors, protects the benefit entitlements of a plan participant or beneficiary from state-law claims after the participant or beneficiary has received a distribution of their benefit entitlements.
Keywords: ERISA, preemption, federalism, benefits, benefit rights, employee benefits, pension, welfare plan, tax, domestic relations, criminal law, creditors, property law
JEL Classification: H11, H77, J32, J33, K11, K14, K31, K34, K36, K39, K49, M52
Suggested Citation: Suggested Citation