The Next Generation of Preemption Cases

regulating insurance, banking, or securities. they may also impact states that want to increase the amount of benefits by requiring 2007); h.b. 2026, 2009 gen. assem., 2009 gen. assem., 2009 reg. sess. (va. 2009). see proposed regulation under erisa � 408(b)(2)). one of the principal goals of erisa is to enable employers "to the only exemptions from the preemption provisions.67 of employee benefit plan. 384 hofstra labor & employment law journal [vol. 26:355 it is not uncommon for companies to operate in more than one state. the bill was not enacted.57 87. shaw v. delta air lines, inc., 463 u.s. 85, 96-97 (1983). beneficiaries. id. the court held that "erisa does not forbid garnishment of an erisa welfare cannot make payments simply by identifying the beneficiary specified by the plan focused on the amount of workers covered by these plans, the fees consequently, the department estimates that this regulation will increase overall 401(k) the u.s. supreme court also stated in fmc corp. v. holliday77 the u.s. supreme court has also held that state laws are preempted of a pension plan is a critical factor in establishing liability under the action. when national health care reform failed in the mid-90s, states assets in the plans grow (and not be unreasonably reduced by fees) and particularly those in the business of insurance, banking, and/or recent years.82 substantially involve erisa plans will be preempted. maintenance organizations ("hmos") to surcharges and required hospitals to collect surcharges erisa.88 * adjunct professor, john marshall law school; tax counsel union pacific railroad. ll.m. in a. uniform plan design and administration erisa."152 speaks to the matter with generality. that said, we have to recognize that our prior the disclosure of those fees to fiduciaries of and participants in the plans. banking or securities, or are generally applicable criminal laws. states of a state sponsored retirement plan. in her 2006 state of the state address, she explained, "my administration will design and open a 11. william pierron & paul fronstin, erisa pre-emption: implications for health reform or no contributions from their employers, spend accumulated savings cases: labor's proposal would still allow financial firms to hide many fees that 134. 463 u.s. 85, 91 (1983). in shaw, the court stated "[i]n fact, however, congress used the amended ("erisa") was written to provide the exclusive rules with 2009] the next generation of preemption cases 385 has held that a state law was preempted as the existence of an erisa 13. a number of state and local governments have enacted this type of legislation, including states have been largely undeterred by erisa's preemption and participants adequate information about plan expenses, 41 j. marshall l. rev. 1005, 1021- prudent level, and helping participants to attain adequate benefits at between. [3] to have a connection, relation, or reference." thus, interpreting the words in whether a state law relates to the business of insurance.129 "benefit adequacy" refers to the amount of benefits that participants ideas that they would like to implement to address these issues. given law and the provisions and objectives of erisa, the state law cannot stand." id. at 844. employees at companies with locations in more than one state 136. health policy issue brief, the erisa industry committee, successful employer- 119. id. sponsored health benefit plans could not exist because of the burden of additionally, the dol received over eighty written comments in displace general health care regulation, which historically has been a matter of local concern.") symposium, held on friday, march 13, 2009. i am grateful for the comments i received from applying in other locations. finally, organizations that represent varying the court noted that the hospitals were not predominantly owned or doubt has been raised concerning the ability of 401(k) plans to to address coverage, fee or benefit adequacy issues with respect to plans.115 concerning small business retirement plans, s.b. no. 652 (conn. 2008), available at erisa explicitly preempts state laws that the plan's administration. see id. at 147-48. the court explained the importance of uniformity 2009] the next generation of preemption cases 373 referenced erisa plans.93 self-employed individuals, small employers, and non-profit organizations. id. the commerce the court 2. see generally james a. wooten, a legislative and political history of erisa retirement plans to participating employers and, if the board determines, in business in san francisco to make minimum required health care expenditures for their workers the u.s. supreme court also held that a state law that to address coverage, cost, and benefit adequacy issues related to 401(k) the program and specified retirement plans for specified employees . . . although the department of retirement systems recommended that the considerable resources monitoring state laws and guidance in order to account balance of $25,000. if returns on investments in your account over the next 35 reg. 20,423, 20,457 (apr. 25, 2007) (codified at 29 c.f.r. pt. 2550). plans" because it "binds erisa plan administrators to a particular year=2008&submit1.x=9&submit1.y=12&submit1=normal (last visited oct. 24, 2009). general assembly's web site describes the status of sb-652 as passed by connecticut's senate, but regulate them.127 (2007). may have on many of the state's citizens and the state's economy.62 it is unclear whether a "pay or play" approach would be preempted even small employers may have more than one location, particularly labor standards enforcement v. dillingham constr. n.a., inc., 519 u.s. 316, 330 (1997) (holding more employees to defer.151 states have considerable motivations for regulating 401(k) plans. greater washington board of trade, "[a]ny state law imposing standard procedures to guide processing of claims and disbursement of emption "all state laws insofar as they . . . relate to any employee benefit plan" covered health insurers were not permitted to discriminate against providers who were willing to accept their 3. erisa � 514, 29 u.s.c. � 1144(a). the program is defined in the house bill as "maryland voluntary complying with overlapping and inconsistent state laws."136 attempting to regulate 401(k) plans. must seek (1) to minimize costs by helping small employers and individuals, (2) arrangements and status of sb-652 as passed by connecticut's senate, but that no action was taken by connecticut's plan or an erisa plan is essential to the law's operation.90 104. id. at 147. similarly, states will look to employers the u.s. supreme court has held that a state law refers to an require employers to pay a portion of their plans' fees. 43 center for retirement res. at b.c. 1, 7 (2006), available at healthcare and adult care programs."). the health plans v. miller.132 typically review, analyze, and frequently provide comments on. in response to its proposed regulations on the requirements for a reasonable participation rates from 73 percent to between 77 percent and 80 percent. require[d] them to purchase the mental-health benefits specified in the statute when they 26. id. b. transfer of employees among locations preemption language that went considerably beyond the disclosure act and previous legislative 156. egelhoff v. egelhoff, 532 u.s. 141, 147 (2001). the automatic ira bill of 200732 jan. 2009), available at it should be stressed that with the narrow exceptions specified in the publication, the solicitor general's office has not responded. however, in fielder, the fourth emphasized that the state's regulation of a plan design feature was preempted by erisa because it concerns regarding 401(k) plans have been primarily preempted because it only had an indirect economic influence on erisa 73 fed. reg. at 43,015; see also employee benefits security administration of the u.s. department retirement security, especially for many low-income workers 1 (nov. 2007). enable plans to attempt to minimize their costs and explore new methods and potential conflicts of interest. these written disclosures would be required before a service 90. cal. div. of labor standards enforcement v. dillingham constr., n.a., inc., 519 u.s. of health care reform proposals, "[w]ithout erisa's nationally uniform automatic iras, which would include an automatic enrollment feature.31 401(k) plans.16 contribution rates can lead to adequate income replacement rates in retirement for many workers; 2. fees iras to the residents of maryland."56 fees can have a considerable impact on the amount of money turn to their states' resources to assist them during retirement if they do basis from the employee's pay unless the employee elects a different insurance' under [section] 1144(b)(2)(a), it must satisfy two the court stated that requiring companies "to design their programs in 27. erisa section 514(e) was added by section 902(f)(1) of the pension protection act of in 401(k) plans.41 10. several states have considered universal retirement plans for their residents, including although 401(k) plans are typically not subject to regulation by the previously introduced legislation, and likely future legislation. part ii of satisfy their fiduciary obligations. fiduciary requirements for disclosure in participant-directed 40. employee benefits security administration of the u.s. department of labor, reasonable for determining 401(k) plans to include investments that they consider low cost or 117. id. iii. need for preemption of state laws that impact 401(k) state laws that require plans to include investments that they with the u.s. congress and the variety of federal agencies that oversee california, connecticut, illinois, indiana, maryland, massachusetts, michigan, pennsylvania, rhode "pay or play laws").13 determination of whether a state law is preempted by erisa. in shaw considered retirement savings plans for private-sector employees include california, illinois, "truths" of personal social security accounts: evidence from the world of 401(k) plans, 81 n.c. that "congress intended by erisa to `establish pension plan regulation thus, the u.s. supreme court has taken the position that state laws would subject a plan to potentially conflicting state regulations. id. at 65. [a]ny plan, fund, or program . . . established or maintained by an health care fund act looked less like a tax given the few employers who were subject to the tax with respect to 401(k) plans. additionally, as eric noted, "[d]isparate securing our future 15 (jan. 25, 2006), available at practice is limited to entities within the insurance industry."131 persons and organizations would need to devote considerably more time, they only have an indirect economic impact on erisa plans or are laws offer 401(k) plans and for those companies that sponsor plans, not all law. and in this context the burden is exacerbated by the choice-of-law problems that whether a state law regulated insurance in kentucky association of 102. id. at 148. the u.s. supreme court's but not for patients insured by blue cross/blue shield plans. id. the court held that the surcharge 514(e)(2), 29 u.s.c. � 144(e)(2)(b). company that sponsored a defined contribution plan, such as a 401(k) has been given this issue, states are likely to want to enact laws that 50. conn. gen. assembly, 2009 regular session bill information: an act re-introduced the bill as sb-971. the connecticut general assembly's web site describes the the only type of retirement plan offered by their employer in 2006.21 in maryland, legislation was introduced to create voluntary 112. id. plans. thus, in order to keep the system as efficient and effective as 47. id. surrounding circumstances such plan, fund, or program (i) provides retirement plans that do not promise specific benefit amounts") (last visited nov. 1, 2009). the dol issued proposed regulations to require provisions was initially very broad, but has narrowed significantly in today we make a clean break from the mccarran-ferguson factors and active participants.20 59. governor jennifer granholm, 2007 state of the state address, our moment, our choice: however, the overall benefit plans covered by this subchapter." erisa � 514(c)(2), 29 u.s.c. � 1144(c)(2). which results in economies of scale and reduced costs for plans. as the available at the court held that a garnishment statute's general preempted by erisa because, as discussed above, state laws cannot the court stated that the state law conflicted with the 120. id. similarly, the court held that a state law that allowed a non- although the bill was passed by connecticut's senate in in order to make sure that workers have sufficient benefits at the court has also found that a tax on hospitals only had an issue.40 139. in 401(k) plans, these costs could be borne by participants. in defined contribution plans, (conn. 2009), available at 36. a memorandum for the heads of executive departments and agencies from rahm covered by erisa, if they were approved. id. at 319-20. however, the court held that the law's the court did not delineate any specific 2550). the bill in february 2009.50 ii. erisa preemption workers at companies that operate in multiple states should be able sponsored health insurance programs are subject to erisa regulation . . . any state law imposing the 2009] the next generation of preemption cases 367 the court held that the law did not regulate erisa plans.111 interaction between organizations that represent varying interested the court emphasized the importance of charged to the plans, and the adequacy of the retirement savings of we have no difficulty in concluding that the human rights law and disability benefits an "explicit congressional statement about the pre-emptive effect of its action"); james a. wooten, http://www.spectrumpension.com/media/4359/wa%20st%20vol%20ret%20acct%20report%20final coverage that was not required under federal law.94 401(k) plans. ken mcdonnell, income of the elderly population age 65 and over, 2006, 28 ebri notes 1, 10 congress created a preemption system that works effectively for an environment of differing state regulations would complicate the companies and thus, using that type of recharacterization as a means to validity of state laws.80 61. see, e.g., a.b. 2940, cal. leg., 2007-08 reg. sess., at 1-4 (cal. 2008); s.b. 25, 79th leg., benefits." uniformity is impossible, however, if plans are subject to different legal although the phrase "relate to" approaches taken by the federal government and/or have alternative although the law had an impact on erisa plans, the court the federal register should be withdrawn to give the new administration a chance to review them. court held that the use of subrogation provisions was a plan design feature. id. at 60-61. the court introduced in both the state senate and house of representatives for automatic enrollment provides that an employee will become a extend to the furthest stretch of its indeterminacy, then for all practical purposes pre- and to read the presumption against pre-emption out of the law whenever congress 9. see, e.g., david pratt, retirement in a defined contribution era: making the money last, the congressional research service 44. united states government accountability office accounting office, report pronounced.8 achievement of this legislation, the reservation to federal authority the the u.s. supreme court's interpretation of erisa's preemption supplemental retirement plans to "implement, maintain, and administer results from excessive fees being paid by their 401(k) plans or their 158. golden gate rest. ass'n v. city & county of san francisco, 546 f.3d 639 (9th cir. iv. preemption of state laws that impact 401(k) plans 103. id. at 148-50. 71. 463 u.s. 85 (1983). payroll deduction or iras and a state administered 401(k) as options.52 required employers to provide a minimum level of benefits to their of plans. they could also attempt to require plans offered by employers significant portion of workers, keeping the fees paid by the plan at a standards, the most creative, innovative and cost-effective employer- try to find ways to increase participation using similar methods. show that as baby boomers (those born between 1946 and 1964) reach their golden years, the employment or beyond . . . .149 49. conn. gen. assembly, 2008 regular session bill information: an act disclose the types of services that they will provide to plans, their compensation for those services, 486 u.s. 825, 830-38 & n.12 (1998). should be able to transfer to another location without changing benefits. a request for information with respect to fee disclosures to 401(k) plan erisa defines the term "employee benefit plan" broadly to include deferral percentage.157 "pay or play" bills (2006), http://www.ncsl.org/default.aspx?tabid=13873. see generally amy the dol's efforts have been met with opposition. in response to in order to encourage employee participation, congress included egelhoff that a state law that requires plans to be administered in a state and local regulation.74 january 17, 2007. rest. indus. leaders ass'n v. fielder, 536 f.3d 639 (9th cir. 2007). rules must apply. as a result, erisa's preemption provisions must be for their retirement and achieve economic security."58 mandates the manner in which plans are administered, or conflicts with emanuel, assistant to the president and chief of staff was published in the federal register on decisions, rules, regulations, or other state action having the effect of not merely to pension benefits, but to the existence of the plan itself."92 ultimately arriving at retirement with insufficient savings to support for small companies in particular, states will want to make it easier, if are essential to its existence. as the u.s. supreme court indicated in documents. instead they must familiarize themselves with state statutes so that they can (or specifically elects to have such contributions made at a different percentage) . . . ." erisa � representative dent indicated that they intended for erisa's the court in shaw v. delta air lines, inc. stated that be able to accumulate sufficient assets within their plans. states have laws of general applicability do not relate to employee benefit plans. 132. 538 u.s. 329 (2003). miller involved kentucky's "any willing provider" law, whereby both employer sponsored plans and iras.53 to be preempted by erisa.6 proposed "an act concerning small business retirement plans, bill no. sb-652 (conn. 364 hofstra labor & employment law journal [vol. 26:355 the dol straightforward. they generally provide that erisa "shall supersede the line here. c. benefit adequacy issues narrowing interpretation of erisa's preemption provisions and of the 29 u.s.c. � 1104(a)(1)(d) (2006). thus, a state law that differs from the plan's terms would cause 59&which_year=2008&submit1.x=12&submit1.y=6&submit1=normal [hereinafter bill argument, stating "[t]here is overriding evidence that the fair share act's primary purpose is to massachusetts, pennsylvania, rhode island, tennessee, virginia, and term `state' includes a state, any political subdivisions thereof, or any agency or instrumentality of solutions currently considered by states have been voluntary. however, court narrowed its approach beginning with n.y. state conference of who don't offer a pension plan. at minimal expense to state statute that specifically exempted erisa welfare plans from the general statute. id. the general the court stated, "[n]or state laws that attempt to regulate 401(k) plans will therefore be legislating in this area.14 123. id. at 830. 360 hofstra labor & employment law journal [vol. 26:355 ." but that, of course, would be to read congress's words of limitation as mere sham, if they require plans to be designed or administered in a particular benefits and the relative costs of competing insurance to provide 48. press release, state sen. donald williams, democratic senate makes history--passes 2009] the next generation of preemption cases 381 the court also described congress' cognizant of erisa's provisions and attempt to draft laws in such a way implement automatic iras. however, as discussed below, these types documents, http://www.pbgc.gov/practitioners/law-regulations-informal- it 148. employment retirement income security act (erisa) of 1974 � 3(3); 29 u.s.c. � the court also held that a state law was preempted because it 1st reg. sess. (w. va. 2009); s.b. 5791, 61st leg., 2009 reg. sess. (wash. 2009); s.j. res. 1075, purposes of erisa preemption. as a result, state-required arrangements visited oct. 24, 2009). participant spouse to transfer her interest in retirement benefits was 366 hofstra labor & employment law journal [vol. 26:355 states that want to reduce plan fees also have several options. they only approximately 42% of workers at small companies were offered the 358 hofstra labor & employment law journal [vol. 26:355 does the indirect influence of the surcharges preclude uniform that only impose an indirect economic impact on erisa parties with respect to erisa plans should be able to work with the u.s. state laws of general applicability are not preempted.109 77. 498 u.s. 52 (1990). the court particular manner is preempted by erisa.156 not preempted and held that a law that only has an indirect economic 2001-01a (jan. 18, 2001), u.s. dep't of labor, employee benefits sec. admin., available at debuono, the court considered whether new york could impose a gross receipts tax on the income employers, and individuals, (2) arrangements and investments through example, states may attempt to require plans to include automatic general as to whether it should hear the case on october 5, 2009. as of the date this article went to and potential conflict of interest for service providers,39 states have considerable reasons for wanting to legislate in this have at retirement and the ability of participants to have sufficient funds committee of the connecticut general assembly stated that the "program this bill seeks to establish analyses of automatic enrollment programs demonstrate that such programs increase 401(a)(4), 401(k), 410(b). contribution plan to be available to self-employed individuals, small also be preempted. the u.s. supreme court indicated in fmc corp. participants,141 their future responses to addressing inadequate retirement benefits of intent in enacting erisa. id. at 88-89, 95. the court found that the new york laws were clearly feedisclosures.html (click on each link to view the written responses the department of labor 106. id. in egelhoff, the court emphasized the impact of conflicting laws as well as the affect 131. id. at 743 (citing union labor life ins. co. v. pireno, 458 u.s. 119, 129 (1982) (emphasis 378 hofstra labor & employment law journal [vol. 26:355 school of law; b.a., 1994, fairfield university. this article was written for and presented at the retirement plans are best channeled through congress, where the themselves."44 live on during retirement, states are going to increasingly look for (1992). 20082.pdf. e259428806a3/presentation/publicationattachment/d98bcd53-6cf1-43c2-8d93- professor jonathan forman has also suggested replacing our current system with a uniform pension similarly, the court held that a prevailing wage law was not this consequences that result from inadequate retirement savings and will 141. reasonable contract or arrangement under section 408(b)(2)-fee disclosure, 72 fed. can satisfy the internal revenue code's ("code") nondiscrimination requirements. 26 u.s.c. �� erisa contains several economic opportunity institute noted when discussing washington's 4. limitations to preemption the pbgc also negotiate lower rates. alternatively, states could attempt to require 2007). 30. id. states that is only applicable to the district of columbia is also 80. id. at 65; see also shaw v. delta air lines, inc., 463 u.s. 85, 98-99 (1983). adequacy in defined contribution plans); debra a. davis, how much is enough? giving fiduciaries 72. id. at 98. violate erisa, as erisa requires fiduciaries to comply with the terms the court has held that state laws are not preempted where thus, the court held that the state laws in these cases were savings in defined contribution plans that "workers may receive limited 67. see erisa � 514(b), 29 u.s.c. � 1144(b). department of labor's ("dol") publication on plan fees includes an 145. see generally employee benefits security administration of the u.s. department of 2009] the next generation of preemption cases 365 house of representatives. see bill status report s.b. no. 852 (conn. 2008). the connecticut 652), would have required the comptroller to establish a defined contribution plan to be available to received over eighty written comments, many of which criticized the plans--and 44.7 million workers (45.1%) participated in employer-sponsored retirement plans."). not have sufficient retirement assets, regardless of whether the shortage retirement systems to investigate and design a voluntary retirement enrollment provisions. they could also take an approach similar to the 154. mackey v. lanier collection agency serv., inc., 486 u.s. 825, 830 (1988). states that want to regulate 401(k) plans will likely try to characterize although the u.s. may also want to encourage or require companies that have 401(k) plans indiana, maryland, massachusetts, michigan, pennsylvania, rhode island, tennessee, virginia, u.s.c. � 1144(e)(1) (2006). the dol indicated in the preamble to 29 c.f.r. � 2550 (2008) that: that fewer state laws that impact 401(k) plans were preempted, interested the court has held that state laws are preempted 17. see supra note 9 and accompanying text. transfer of workers of companies that operate in multiple states, and pension and welfare plans.148 transfer) to a location in another state could have his 401(k) plan features private-sector employees include california, illinois, indiana, 12. commerce committee joint favorable report, the state of connecticut's plan (apr. 24, 2008), available at http://www.senatedems.ct.gov/pr/williams-080424b.html. or alternatively pay the states.11 new hires in 2009, compared to 57% in 2008, and only 15% are likely to plan administrators to any particular choice and thus function as a are charged to the plan. id. �� 1002(23)(b); 1002(34) (2006). proper expenses may be paid using hold that for a state law to be deemed a `law which regulates 151. employers can currently design 401(k) plans to exclude categories of workers if the plans local governments were preempted, states continue to consider oct. 15, 2007, http://www.eric.org/forms/uploadfiles/e5f60000000f.filename.eric_- provided that a lower prevailing wage applied to apprenticeship plans, which may or may not be generally crenshaw, supra note 10; uvra update, states updates, supra note 10; dory rand, 2009, http://www.plansponsor.com/pi_type11/?record_id=44850&page=3. the court of general applicability.89 employee benefit plans. erisa's most significant exceptions are for automatic enrollment refers to a plan design whereby amounts are replaced with a mandatory, universal savings plan. teresa ghilarducci, when i'm sixty-four: 24. id. fed. reg. 56,806 (sept. 27, 2006) (codified at 29 c.f.r. pt. 2550). (1980)). retirement income to employees, or (ii) results in a deferral of income 55. md. gen. assembly, 2008 regular session bill information: house bill 1228 court stated that the phrase "relate to" could continue indefinitely and parameters, but indicated that there is a presumption that state laws are preempted because it related to employee benefit plans.123 and expense information to be provided to participants in participant-directed individual account regulation of employee benefit plans. this principle is intended to under current law as the federal circuit courts of appeal are split on requirements. first, the state law must be specifically directed toward b. motivations for state action employers contribute to 401(k) plans using a "pay or play" approach. 316, 325 (1997). d. potential future legislation by state governments v. delta air lines, inc., the court stated that a state law relates to an states accessibility to retirement savings programs to their residents. states terms and conditions and every health benefit plan that offered chiropractic services was required to as the baby boomers retire, these issues will become more not rely on earning an investment premium on risky assets." peter j. brady, can 401(k) plans 152. district of columbia v. greater wash. bd. of trade, 506 u.s. 125, 130-31 (1992). erisa's legislative history indicates that erisa's preemption plans was only 43%.25 plan, 78% of employees participated in the plan.24 rapidly increasing since legislation was passed creating 401(k) plans in default investment alternatives under participant directed individual account plans, 72 fed. reg. bulletin: abstract of 2006 form 5500 annual reports 1 (dec. 2008). in creating the coalition that pushed erisa through congress"); james a. wooten, a legislative regulation argued that the maryland's law was a tax on employers. retail indus. leaders ass'n v. law that prevented employee benefit plans from exercising their subrogation rights. id. at 54. the pay or play law after the fourth circuit court of appeals found that 380 hofstra labor & employment law journal [vol. 26:355 64. employment retirement income security act (erisa) of 1974 � 514(a), 29 u.s.c. � for example, when the dol issued congress and the variety of federal agencies that oversee erisa plans. mackey that an anti-garnishment statute that specifically exempted numerous states have considered ways in which to provide 2009] the next generation of preemption cases 361 c. actions taken by state governments relationship to erisa plans was too tenuous, as apprenticeship plans do not need to be erisa may confront an administrator when the employer is located in one state, the plan employee benefit plan if it refers to an erisa plan or has a connection plans and the law did not dictate erisa plans' choices. id. at 334. your account balance will grow to only $163,000. the 1 percent difference in fees and the law did not impact plan administration.113 (conn. 2008), available at the employee retirement income security act of 1974,1 in 2007, congress proposed legislation that would mandate beneficiary.104 completely eliminating 401(k) plans. professor teresa ghilarducci suggests that 401(k) plans be u.s. 825, 831-32 (1988) (finding that a state's garnishment statute's general provisions were not the disclosures that fiduciaries must make to participants in 401(k) plans see id. 401(k) plan or for employers who already sponsor 401(k) plans, to allow have primarily considered setting up programs to encourage individual experimentation, 49 wm. & mary l. rev. 229 (2007). preempted and stated: 127. id. at erisa � 514(b)(2)(b). plans, states are likely to pass laws designed to increase participation. 99. egelhoff v. egelhoff, 532 u.s. 141, 147 (2001). in egelhoff, a washington statute for example, the california assembly passed a participants by eliminating the threat of conflicting and inconsistent e95d00f24801/ecbel_august_2008_5.pdf (discussing erisa � 514(e)). supreme court initially interpreted erisa's language broadly, the http://www.dol.gov/ebsa/regs/cmt-408(b)(2)-combined.html (displaying written responses and operated by erisa plans.119 100. id. at 147. adequately saving for retirement. part of the retirement savings the law was subject to erisa, but was not preempted as a result of the saving clause. id. at 334-36. manner. the court found that a state law that prevented employee risk; second, whether the practice is an integral part of the policy the congress, congressional res. serv. (crs washington, d.c.), july 14, 2009, at 3. he stated: the proposed regulations on the disclosure of compensation received by interpreted broadly by courts in order to discourage states from erisa's preemption provisions initially appear fairly 57. see md. gen. assembly, senate current status report, 425th sess., at 43 (2008), despite the large number of 401(k) plans, many companies do not would create "considerable inefficiencies in benefit program operation . . investments through economies of scale, and (3) standardization and other measures." id. although 65. erisa � 514(c)(1), 29 u.s.c. � 1144(c)(1). erisa section 514(c)(2) indicates that "the 39. reasonable contract or arrangement under section 408(b)(2)-fee disclosure, 72 fed. states can pass legislation that would require employers to sponsor participation rate for private-sector workers in defined contributions as 38. proposed dol reg. � 2550.404a-5 would require investment information, including fee was not preempted by erisa. id. the ggra filed petition for a writ of certiorari with the u.s. rates otherwise tend to be lowest, namely lower-paid, younger and shorter-tenure 109. id. at 662. the deferral of income would be preempted by erisa as erisa plans in travelers, the relationship between the insurer and the insured; and third, whether the 130. see id. at 735-37 (citing attorney general v. travelers ins. co., 433 n.e.2d 1223, 1232 52. washington voluntary accounts report to the legislature 1 (2009), available 2008, it was not enacted into law.49 137. id. 401(k) plans through the regulation of service providers to 401(k) plans, employers help to ensure that workers had adequate health care by workers.18 2009). in the area of employee benefits, states have acted in response to concerning small business retirement plans, s.b. no. 971 (conn. 2009), available at policies and health plans. id. at 727. the u.s. supreme court held that the statute related to considered to be a state law for this purpose.66 the practice has the effect of transferring or spreading a policyholder's https://www.policyarchive.org/bitstream/handle/10207/11145/uvraupdate- of hospitals operated by erisa plans as well as other hospitals. id. at 809. the court held that the donald williams, democratic senate makes history--passes 1st in the nation universal 401(k) that is, from the views of the dol as well. states may disagree with the went to publication.36 likely to look for ways to improve them. this is particularly true, given 382 hofstra labor & employment law journal [vol. 26:355 either, which purports to regulate, directly or indirectly, the terms and conditions of employee http://www.michigan.gov/documents/gov/2007_sos_186092_7.pdf. abstracts of the 2006 form 5500 annual reports, the most requirements by reference to such covered programs must yield to erisa." id. at 130-31. (2006) (noting that "[t]he desire for federal preemption was a key factor--perhaps, the key factor-- improve 401(k) plans, especially with respect to coverage, fees, and 2007, http://www.mobilityagenda.org/illinois.pdf. 125. employment retirement income security act (erisa) of 1974 � 514(b), 29 u.s.c. � government, we will help tens of thousands of michigan workers save became erisa originally contained a limited pre-emption clause, preempted because it only had an indirect economic influence on erisa plans. id. the state law 372 hofstra labor & employment law journal [vol. 26:355 value . . . received, or to be received, directly from the plan or plan sponsor or indirectly . . . in the court also stated that 98. id. (quoting coyne, 482 u.s. at 11). debra a. davis* elected to participate in the plan.26 obligations in different states. erisa's preemption provisions. see id. at 662. in travelers, new york subjected health the governing text of erisa is clearly expansive. section 514(a) marks for pre- are likely to believe that they can improve upon the current system. 107. boggs v. boggs, 520 u.s. 833, 835-36, 841 (1997). in boggs, the participant's children she reiterated her entities engaged in insurance. second, as explained above, the state the court employers who provided health insurance to provide continuation collected by the census bureau, there were 99.2 million workers aged and 21 older with a paid job state regulation of 401(k) plans administration of a plan.101 his account, which is equal to the amount of deferrals made by the participant, any employer when determining whether the state law related to the business of describes it as an arrangement, "[u]nder which a participant is treated as having elected to have the it stated: the state law would require plans to continuously monitor state laws to determine their impact on for almost 94% of participants, a 401(k) plan was the court found that a state law was preempted because it subjected the 111. id. at 659. 20. id. in michigan, governor jennifer granholm advocated the adoption 1144(b) (2006). provisions are not without limitation.108 1. coverage to recover in a wrongful discharge action if they could establish that the fact, however, congress used the words "relate to" in [section] 514(a) in their broad cost of providing benefits.120 intervene. residents that lack adequate retirement savings are likely to as to avoid preemption, erisa does not serve as a complete deterrent in their states to include low cost investments or mandate that the regular session bill information: senate bill 728 (2008), available at laws are preempted to the extent that they would "directly or indirectly prohibit or restrict the 149. id. at � 1002(2)(a). with respect to 401(k) plans in order to promote uniform administration, that only impose an indirect economic impact on erisa plans and state b. monahan, pay or play laws, erisa preemption, and potential lessons from massachusetts, 55 29. rebecca moore, economy slows auto enrollment trend, plansponsor.com, feb. 2, automatically revoked a designation of beneficiary upon divorce was ."55 only state laws specifically designed to affect employee benefit plans connection with the services to be provided . . . ." reasonable contract or arrangement under parties and organizations to effectively participate in the political and received to its participant fee disclosure proposed regulation) (last visited nov. 1, 2009). requirements by reference to [erisa plans] . . . must yield to 146. see generally department of the treasury, first periodic update of the 2007- reduced costs for plans. additionally, workers at companies that operate provides a set of standard procedures to guide processing of claims and disbursement of investing in michigan's people 5 (feb. 6, 2007), available at laws.102 http://www.pensionresearchcouncil.org/publications/document.php?file=709. section 408(b)(2)-fee disclosure, 72 fed. reg. 70,988, 71,004 (dec. 13, 2007) (codified 29 c.f.r. workable rules for erisa plans.140 118. debuono v. nysa-ila medical & clinical servs. fund, 520 u.s. 806, 816 (1997). in sole power to regulate the field of employee benefit plans. with the their contributions to their retirement plans did not reach a certain professor susan stabile suggests replacing our employer-based system with a government pension the primary means of saving for retirement for most american during this time, treasury also published over forty to": "[1] to bring into logical or natural association. [2] to establish or demonstrate a connection available to workers in the state.51 provisions were intended to be interpreted broadly.68 for this type of legislation. that state laws are preempted if they require plans to be designed in a 44% in 2008.29 have proposed legislation to address some of these issues.10 the grand irony of erisa?: intersectionality of erisa preemption and remedial issues omitted)). using this three-part test, the court held that the massachusetts statute was saved from participate in a retirement plan during the prior year and who have not the challenges faced by 401(k) plans with respect to covering a that "[t]he prevailing wage statute alters the incentives, but does not professionals & actuaries (asppa), council of independent 401(k) recordkeepers (cikr), erisa furthermore, there are considerable incentives for states to senator williams also expressed his view that erisa's preemption the court should interpret erisa's preemption provisions broadly thus eliminating the threat of conflicting or inconsistent state and local held that its relationship to erisa plans was too tenuous.116 "nothing in the language of the act or the context of its passage indicates that congress chose to provided health plans depend on nationally uniform standards, health policy issue brief, 401(k) plans. the term "fees" is used in this article to refer to the . ."98 %202009%20feb%206.pdf (last visited oct. 24, 2009). percent, your account balance will grow to $227,000 at retirement, even if there are no was the first state-administered 401(k) plan approved by a state 19. employee benefits security admin., u.s. dep't of labor, private pension plan as a result, the three-part test considered "first, whether you to finally pass the small business retirement plan i introduced at this 2009] the next generation of preemption cases 371 further contributions to your account. if fees and expenses are 1.5 percent, however, the administrators must pay benefits to the beneficiaries chosen by state law, rather than to those the commerce committee of plan . . . . we must give effect to this plain language unless there is good reason to plan assets as long as the plan document does not prohibit it. u.s. dep't of labor advisory opinion a. states' approaches to health care coverage 2008, the dol published over sixty documents in the federal register, industry committee (eric), investment company institute (ici), national association of reg. 70,988, 70,989 (dec. 13, 2007) (codified at 29 c.f.r. pt. 2550). about the fees charged to their plans); susan j. stabile, is it time to admit the failure of an 153. fmc corp. v. holliday, 498 u.s. 52, 59-60 (1990). situation, administrators might find that plan payments are subject to conflicting legal shaw v. delta air lines, inc.71 with more burdensome requirements to states with less burdensome consider low cost or require employers to pay a portion of their plans' federal register since 1996) (last visited nov. 1, 2009). although 401(k) plans are typically not 60. senator samuel thomas introduced sb 0024 and representative steve bieda introduced have to deal with state agencies and legislators as well. earnings on those contributions. a participant in a 401(k) plan is entitled to the amount of money in preemption provisions to be broad.73 indus. leaders ass'n v. fielder, 475 f.3d 180, 183 (4th cir. 2007). introduction otherwise have done."); wooten, supra note 2 at 15. council, american institute of certified public accountants (aicpa), american society of pension preemption as it regulated insurance. see id. at 746. the court stated that the statute regulated the to turn this good idea into law. i urge you to pass them now."59 368 hofstra labor & employment law journal [vol. 26:355 preempted because it was a law of general applicability). 1144(e) (which uses the term "automatic contribution arrangement" to describe automatic concern. the washington state legislature, with the support of laws that only have an indirect economic impact on erisa plans and law's impact to be indirect and stated that it would merely increase the compensation 9-1, 9-3 (alvin d. lurie ed., 2007); colleen e. medill, challenging the four the court also explained its reasoning as to why the state law created a risk for plan administration. id. (quoting henry james, roderick hudson at xv (scribner 1977) (1907)). 147. see generally pension benefit guarantee corporation, pbgc's federal register 41. fiduciary requirements for disclosure in participant-directed individual account plans, insurance.130 retirement, workers need to be able to participate in plans, have the limitation ("insofar as they . . . relate") do much limiting. if "relate to" were taken to discussion paper no. 28 (urban-brookings tax policy ctr.), dec. 20, 2007, at ii (discussing the the washington statute also has a prohibited connection with erisa plans because it washington voluntary accounts report to the legislature 3 (2009), not preempted because it only had an indirect economic effect on an erisa plan); cal. div. of who served as fiduciaries of erisa plans sued new york state officials, arguing that the state laws http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selbilltype=house+cal%23&bill_num=4 http://www.spectrumpension.com/media/4359/wa%20st%20vol%20ret%20acct%20report%20final their plan's terms. employment retirement income security act (erisa) of 1974 � 404(a)(1)(d), compensation very broadly for this purpose and included "money or any other thing of monetary preemption of the field, we round out the protection afforded "saving clause"), and generally applicable criminal laws of a state.126 most of which required review by interested persons and satisfied a plan's eligibility requirements for the current year.33 erisa is to enable employers "to establish a uniform administrative scheme, which island, tennessee, virginia, washington, and west virginia. albert b. crenshaw, not saving law "relate to" employee benefit plans. the breadth of [section] 514(a)'s pre-emptive "pay or play" laws, where employers would be required to pay a tax if looked to cases that interpreted the scope of the mccarran-ferguson act service providers to disclose the direct and indirect compensation they 110. id. at 668. in travelers, new york imposed surcharges with respect to hmos. id. at 649. in the private sector in an average month in the first half of 2006. of this number, 61.7 million preemption provisions broadly based on congressional intent), with n.y. state conference of blue requests to testify to its proposed regulation under erisa � 408(b)(2), 29 u.s.c. � 1108(b)(2) taxation, 2001, golden gate university school of law; j.d., 1998, university of connecticut additionally, state laws that require employers to allow all or 16. see, e.g., pratt, supra note 9; davis, supra note 9. several professors have also suggested these concerns have predominantly focused on 6. see, e.g., travelers, 514 u.s. at 668 (indicating that a state law imposing surcharges was default investment regulation that: an arrangement maintained by an employer that results in the a fiduciary to violate erisa. egelhoff, 532 u.s. at 149-50. the court explained that "[t]he statute stated that "[a]n indirect economic influence, however, does not bind ability to participate in a defined contribution plan and only around 33% employee accounts.54 [hereinafter uvra update, universal voluntary retirement accounts]. connecticut was went to publication, the bills have not been enacted. 101. id. at 147-48. `relate to' in [section] 514(a) in their broad sense. . . . the bill that plans, but that simply cannot mean that every state law with such an effect is pre-empted by the retirement benefits to them. see id. at 135. the court held that the statute was preempted because http://www.dol.gov/ebsa/regs/cmt-fiduciaryrequirements.html (displaying written responses it a list of guidance that the treasury department published on the topic of retirement benefits). the 376 hofstra labor & employment law journal [vol. 26:355 70. see generally alessi, 451 u.s. at 522 (noting that 29 u.s.c. � 1144(a) aids the courts as plans 2009] the next generation of preemption cases 357 benefit plans. congress' objectives in enacting erisa's preemption these issues as they have with health care, that is, to require employer to the chairman, committee on education and labor, house of representatives, participants in 401(k) plans about the fees charged to their plans); jonathan barry forman, the thus, the court has held that state laws are preempted if they have (1987)). enacting laws that impact 401(k) plans. part iii explains the benefits of primary chiropractor for the plan's participants. id. at 331-32. the u.s. supreme court held that given that maryland's fair share health care fund act was preempted by erisa, other states will benefit plans from exercising their subrogation rights was preempted.96 with an erisa plan.87 already begun to consider legislation to address these issues and at least at retirement). benefit plan, even where the purpose is to collect judgments against plan participants." id. at 841. %202009%20feb%206.pdf (last visited july 22, 2009). jurisdiction of the federal government.70 in multiple states should be able to transfer among the company's the same rules should apply to all workers, regardless of where they are the law would have required the fiduciaries to similarly, states that want to increase the amount of benefits given the significant attention placed on 401(k) plans, states are regulation by states.138 from 1998 to 2006, crs report for congress 1 (2009), consideration of universal retirement accounts, "as this is the first as the u.s. supreme court acknowledged in shaw v. delta air legislature.48 regulate employers' healthcare spending, not to raise revenue." id. at 189. maryland's fair share i. state action 401(k) plans). action. the court held that this located. business retirement plans, bill status report for substitute for raised s.b. no. 652 indirect economic effect on plans and, therefore, was not preempted.118 that want to regulate 401(k) plans may try to characterize their laws as statute would have required plans to garnish amounts otherwise payable to participants and about different plan provisions applying in other locations. as a result, in 2006, there were 466,000 401(k) plans that had 58.4 million 121. see mackey v. lanier collection agency & serv., inc., 486 u.s. 825, 831 (1988). with service providers on behalf of plans or facilitating the aggregation c. involvement by interested parties assets by participants, the selection among the plan's investment options by participants, the lack of monitor all types of employee benefit issues, not just those relating to 401(k) plans. see generally regulation of an erisa plan itself . . . ."112 155. id. at 829. id. at 148-49 (footnote omitted). consequently, the court found that the state law was preempted. preempted if they interfere with plan design or administration. seeks to establish must seek (1) to minimize costs by helping small 370 hofstra labor & employment law journal [vol. 26:355 1st in the nation universal 401(k) plan (apr. 24, 2008), available at choice of rules for determining beneficiary status."100 plans v. travelers ins. co., 514 u.s. 645, 662 (1995) (holding that the state law at issue did not 43. see, e.g., alicia h. munnell & annika e. sund�n, 401(k) plans are still coming up short, http://www.mlis.state.md.us/2008rs/currentstatusreport/senatecurrentstatusreport.pdf. themselves to service providers on an aggregated basis in order to benefits." uniformity is impossible, however, if plans are subject to guidance that impacted health and welfare plans.146 program of its kind in the nation, there are numerous irs, employee of the plan documents.106 washington, d.c.), available at http://www.dol.gov/ebsa/publications/401k_employee.html (last believe congress intended the language to have some more restrictive meaning . . . . in 94. id. at 127-28. status report s.b. no. 852]. if erisa's preemption provisions are interpreted more narrowly so 51. crenshaw, supra note 10, at 3-4; uvra update, states updates, supra note 10, at 4. state laws that have an impact on employee benefit plans have been held plans.110 contributions, and other income such as forfeitures that are allocated to the account and the sense. a participant's benefit is primarily based on the contributions that are made to his account and any overall senior population will increase dramatically--as much as sixfold by 2040. advocates for fees would also be preempted. the u.s. supreme court stated in u.s. supreme court noted in egelhoff: 374 hofstra labor & employment law journal [vol. 26:355 court has since limited the circumstances under which state laws will be state laws that require employers to adopt a program that results in general assembly's web site also reflects the status of sb-971. see an act concerning small certain categories of employees to participate in their 401(k) plans would provided health insurance to continue to cover employees while they were receiving or eligible to plan, in the normal sense of the phrase, if it has a connection with or reference to such a as more workers reach retirement age without adequate assets to to erisa plans as well as interested individuals currently work with the connection with employee benefit plans. american heritage dictionary 705-06 (4th ed. 2001). participant lives in another, and the participant's former spouse lives in a third. in such a interpretations of its meaning have varied.5 regulation of retirement plans is best handled by the federal government it related to erisa plans. id. at 140. preempted because it only had an indirect economic impact on erisa for example, statements by erisa's sponsors such as 34. davis, supra, note 9, at 1006 (discussing the information needed by fiduciaries of and 1978.19 (jan. 26, 2009). (concluding that 401(k) plans must be made easier and more automatic in order to effectively enable (apr. 2009), http://www.eoionline.org/retirement_security/uvra_update/uvraupdate-apr09.pdf provided under the plan until the participant specifically elects not to have such contributions made board of trustees of the maryland teachers and state employees that a prevailing wage law was not preempted because it was "quite remote from the areas with preempted because it interfered with plan administration.99 insurance. the u.s. supreme court set forth a three-part test in states are likely to encounter preemption difficulties if they attempt 7. individuals who are not adequately prepared for retirement are more likely to qualify for and the fact that the tax could be avoided completely by providing health benefits to employees. id. the court stated that "the existence 21. id. at 42. with his first wife claimed an interest in his retirement benefits as a result of amounts bequeathed plan documents.105 in order to allow 401(k) plans to operate as efficiently and recent year that data is available, reflect that 401(k) plans have been http://www.newsdesk.org/archives/003208.html (stating that "projected census bureau figures 140. organizations that focus on employee benefit issues include aarp, american benefits employee benefit plans due to pregnancy and a new york law that required companies to pay sick 2009] the next generation of preemption cases 377 stated that the state law was similar to the new york law in travelers in receive workers' compensation benefits. id. at 126-27. the court held that "[s]uch employer- employee benefit plan . . . ."64 applicable only to state laws relating to the specific subjects covered by 23. patrick purcell & john t. topoleski, 401(k) plans and retirement savings: issues for retirement. even though retirement plans are heavily regulated, states it received over eighty written comments in response.142 would have required companies to "bear the requisite `connection with' erisa plans to trigger pre-emption"). opportunity institute, uvra update, state updates, 1 uvra update 4 (mar. 2008), 22 (2008); (discussing the information needed by fiduciaries of and participants in 401(k) plans would thereby lack meaning.85 benefits provided by states as well as to use other resources that are not income-based. ebri preempted.69 as the erisa industry committee ("eric") noted in its discussion were preempted by erisa. id. at 649. the u.s. supreme court acknowledged its prior cases, threshold. amount and reasonableness of the fees charged to 401(k) plans as well as voluntary retirement accounts, supra note 10, at 1-3. 144. fee disclosure, supra note 40 (displaying written responses and requests to testify to its employers and non-profit organizations.46 provisions were not preempted because it was a law of general 85. id. (quoting, henry james, roderick hudson at xv (scribner 1977) (1907)). 142. employee benefits security administration of the u.s. department of labor, fee 45. default investment alternatives under participant directed individual account plans, 71 however, the independent retirement plan advisors (nairpa), pension rights center, and society of actuaries. 3. conflicting requirements though they treat plans more favorably. the u.s. supreme court held in 92. id. at 139-40. it is well established that many of america's workers are not example where a 1% increase in fees results in a 28% decrease in the as of the date this article 1002(3). apparent from that section's language."), with n.y. state conference of blue cross & blue shield 93. district of columbia v. greater wash. bd. of trade, 506 u.s. 125, 130-31 (1992). in as a result, the court considered the state desire to avoid "endless litigation over the validity of state action . . . identified in the plan documents . . . . in particular, it runs counter to erisa's commands . . . ." id. administration of nationwide plans . . . ."97 the inclusion in any plan of an automatic contribution arrangement . . . ." erisa � 514(e)(1), 29 insurer and the insured.133 connecticut's proposed bill, entitled "an act concerning small business retirement plans," (sb- provisions. even though courts have held that several laws by state and however, the statute's exception for erisa plans was changed as a result. consequently, participants in addition to plan 2009] the next generation of preemption cases 375 not preempted.121 at 147. 514(a) in their broad sense. to interpret [section] 514(a) to preempt may not be saving for retirement is emerging as a national social representative dent stated: law must substantially affect the risk pooling arrangement between the the dol commented in the preamble to the proposed as discussed below, the court should interpret erisa's that adequate asset accumulation can be achieved using only a 401(k) plan; and that these results do of employee benefit issues, not just those relating to 401(k) plans. metropolitan life insurance co. v. massachusetts128 96. fmc corp. v. holliday, 498 u.s. 52, 54, 65 (1990). fmc corp. involved a pennsylvania l. rev. 901, 907-08, 937-46 (2003) (discussing the effect of fees on employees' account balances (2006)) (last visited nov. 1, 2009) [hereinafter fee disclosure]. connecticut's senate re-introduced podium last year . . . rep. bieda and sen. thomas have introduced bills court held that the anti-garnishment statute was preempted because it traditional state concern limitations on "relate to" will apply). (internal citations omitted). 329, 334 (1997). in dillingham, the court held that a california prevailing wage law was not erisa welfare plans from the general statute was preempted.154 a state law was preempted where it required the u.s. supreme court in employer's principal reason for terminating their employment was to institute, uvra update, universal voluntary retirement accounts: state updates 81. see discussion supra part ii.b-c (discussing the emergence of state laws regulating participants to save for retirement). alternatively, peter j. brady argues that "moderate 401(k) stated that "[w]hile a step in the right direction, the department of substitute are intended to preempt the field for federal regulations, of helping participants to prepare for retirement, a uniform system of could potentially conflict with the plans' provisions or other state respect to retirement plans.2 received to its request for information) (last visited nov. 1, 2009). to transfer among the company's locations without having to worry the bill was passed by connecticut's senate, it was not enacted into law. connecticut's senate has proposals."). 53. s.b. 5791, 61st leg., reg. sess. (wash. 2009); h.b. 1893, 61st leg., reg. sess. (wash. seniors fear this will place greater pressure on state and federal governments for subsidized u.s. congress, the dol, u.s. department of treasury ("treasury"), and the participants opt out of participating in the plan or elect a different package if a plan wishes to provide one. it simply bears on the costs of possible, erisa's preemption provisions should be interpreted broadly. they take from 401(k) plan participants' accounts."42 encourage states to attempt to pass laws that regulate erisa plans.81 pension benefit guarantee corporation, general faqs about pbgc, states may attempt to increase the amount of benefits that their state laws that rely on erisa plans for their meaning or that automatically deferred into the plan from participants' pay checks unless 84. 514 u.s. 645 (1995). in travelers, the u.s. supreme court restricted the scope of state laws that address 401(k) plans. part v concludes that the benefits to them was preempted.91 "[i]n fact, however, congress used the words `relate to' in [section] a substantial impact on a plan's design or interfere with the 2009] the next generation of preemption cases 363 finally, i wish to make note of what is, to many, the crowning additionally, plans should not have to expend interested parties with respect to erisa plans should be able to work erisa includes several exceptions to preemption.125 provisions were to avoid the potential for conflicting or inconsistent state 63. uvra update, states updates, supra note 10, at 4. states are likely to have difficulty attempting to impact coverage, dictate the choices, facing erisa plans."117 particular manner.153 http://www.dol.gov/ebsa/regs/aos/ao2001-01a.html. as states face overwhelming costs related to retirees they may approach law, of any state."65 cross & blue shield plans v. travelers ins. co., 514 u.s. 645, 668 (1995) (stating that in areas of of providing benefits to covered employees will have some effect on the administration of erisa connecticut has considered legislation to establish a defined although connecticut's senate passed the bill, it was not enacted into law. the connecticut reports that for 2007, only 55% of employees worked for a private-sector erisa plans to facilitate workable rules for erisa plans and should not guidance/content/page13189.html (providing hyperlinks to all pbgc content published in the the u.s. supreme court has also held that state laws are preempted from patients covered by a commercial insurer. id. at 649. hospitals were not required to collect with respect to erisa plans that interested persons and organizations employer-based pension system, 11 lewis & clark l. rev. 305, 310-16 (2007) (discussing the automatic enrollment, only 25% are somewhat or very likely to add it for 133. id. at 341-42 (citations omitted). 129. id. at 743. metropolitan life involved a massachusetts statute that required a minimum be more likely to avoid these problems. provide adequate retirement resources, (pension research council working paper wp2009-01 indicated that the median (midpoint) annual income for the elderly population was $16,770 in 2006. explained that the statute had "an impermissible connection with erisa regulated insurers. id. at 743. plan.23 automatic enrollment provisions in the pension protection act of 2006.27 edward zelinsky, paul secunda, james wooten, and phyllis borzi on earlier drafts of the article. or alternatively, creating a mandatory employer-based system. stabile, supra note 9, at 325-29. id. at 148 (citing coyne, 482 u.s. at 9). 56. h.b. 1228, 2008 leg., gen. assem. sess. (md. 2008). words `relate to' in [section] 514(a) in their broad sense." id. at 98. 74. id. at 99 (citing 120 cong. rec. 29,197 (1974)). http://crr.bc.edu/images/stories/briefs/ib_43.pdf?phpmyadmin=43ac483c4de9t51d9eb41 court's interpretation of them, and challenges states would face in operate.139 effectively as possible, they must be free from potentially conflicting interferes with nationally uniform plan administration. one of the principal goals of where they act on an erisa plan, an erisa plan is essential to the avoid contributing to its retirement plan for them or paying retirement states have several options. they can offer voluntary retirement if 401(k) plans were subject to state law, they could be required to 401(k) plans when its provisions are interpreted broadly. in order to erisa prevents states from deeming erisa plans to be insurance effect on an erisa plan is not preempted.86 the court stated: 83. shaw, 463 u.s. at 98. shaw involved a new york law that prohibited discrimination in v. conclusion significant financial pressures by passing laws to require employer administrative practice or the provision of a uniform interstate benefit the court held that a state law that imposed surcharges was not the employers surveyed offer automatic enrollment in 2009, compared to by erisa, and one might be excused for wondering, at first blush, whether the words of 88. see, e.g., ingersoll rand co. v. mcclendon, 498 u.s. 133, 139-40 (1990); fmc corp. v. published by the department of labor in the federal register) (last visited nov. 1, 2009). 138. navigating the aca, eaca, qaca, and qdia rules, executive compensation, preemption, part 3, 15 j. of pension benefits 15 (2008) ("the desire for uniformity required january 26, 2009 and stated that all proposed and final regulations that have not been published in residents will have at retirement by regulating 401(k) plans. for although regardless of erisa's preemption provisions. although states will be regulatory processes. part iv analyzes the likelihood of preemption of 113. id. at 659-60. bill, the substantive and enforcement provisions of the conference 60,451, 60,470 (oct. 24, 2007) (codified 29 c.f.r. pt 2550) (footnotes omitted). include different features in the plan based on where the employee was a 126. id. at erisa � 514(b)(2)(b)-(4). the dol has issued proposed regulations to increase fee as exclusively a federal concern.'"78 _employers_depend_on_national_uniformity.pdf. a spousal beneficiary designation upon the participant's divorce. id. at 143. the plan's terms http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selbilltype=bill&bill_num=652&which_ benefit adequacy, without being preempted by erisa. as the individual account plans, 73 fed. reg. 43,014, 43,015 (july 23, 2008) (codified at 29 c.f.r. pt. 115. cal. div. of labor standards enforcement v. dillingham constr. n.a., inc., 519 u.s. 316, policyholder by limiting the type of insurance that an insurer may sell to the policyholder" and only provider entered into, extended, or renewed an arrangement with a plan. the dol defined law's operation, or the state law requires a particular plan design, enough at work? how about a boost from your state?, aarp bulletin today, july 2, 2008, greater washington board of trade, a law of the district of columbia required employers who 14. see edward a. zelinsky, the new massachusetts health law: preemption and and coverage, ebri notes, feb. 2008, at 12, http://www.ebri.org/pdf/briefspdf/ebri_ib_02a- 73. id. at 98-99. plans. part i discusses the interest of states in legislating 401(k) plans, http://www.whitecase.com/files/publication/739a5dbd-41ee-451e-81f0- http://assets.opencrs.com/rpts/rl33116_20090130.pdf (more specifically, "[a]ccording to the data the plot against pensions and the plan to save them 24 (princeton univ. press 2008). a. coverage issues level of mental health benefits to be provided to residents who were insured under certain insurance receive to plan fiduciaries37 2008) http://www.cga.ct.gov/2008/jfr/s/2008sb-00652-r00ce-jfr.htm. the state of the legislation would have required the state have had no substance without an erisa plan.95 91. ingersoll-rand, 498 u.s. at 139-40 (1990). the texas statute that allowed plaintiffs to reasons, do not take advantage of the opportunity to participate in their federal statute." id. at 816. employee accounts program established under this title offering law, in effect, prohibited companies from designing their erisa plans with subrogation provisions employers pay a percentage of the fees. u. kan. l. rev. 1203 (2007) (analyzing the creativity of new "pay or play" laws by states for participants in pennsylvania as these provisions would not be enforceable. id. at 59-60. the plan in her 2007 state of the state address when she said "i also urge at the washington statute at issue here poses precisely that threat. plan administrators relate to employee benefit plans.3 15. the california assembly passed abx1 1 on december 17, 2007. fielder was decided on spreading of risk, regulated "an integral part of the relationship between the insurer and the systems commented that: illinois voluntary accounts, sargent shriver national center on poverty law, jan. 18, may have changed the cost of providing benefits, but did not relate to erisa plans. id. at 662. washington, and west virginia. creshaw, supra note 10; uvra update, universal pension plans are defined as: additionally, rep. george miller has expressed that government accountability office ("gao") commented in its report on 105. id. at 150. 645, 661 (1995) (finding that although congress intended erisa's pre-emption to be broad, carasso & jonathan barry forman, tax considerations in a universal pension system (ups): 2008 priority guidance plan (2008), http://www.irs.gov/pub/irs-utl/2007-2008pgp.pdf (showing gate restaurant association ("ggra") sued the city of san francisco, claiming that the ordinance 75. id. 105th gen. assem., reg. sess. (tenn. 2008); h.b. 1669, 2007 gen. assem., 2007 reg. sess. (pa. 37. proposed dol reg. � 2550.408b-2 would require certain types of service providers to which erisa is expressly concerned"); mackey v. lanier collection agency & serv., inc., 486 lines, inc., erisa was intended to preempt state laws that relate to participation rates on average from approximately 70 percent to perhaps 90 percent. explains "[c]ongress used the words reg. 70,987, 70,994 (dec. 13, 2007) (codified at 29 c.f.r. pt. 2550). given the low percentage of workers who participate in 401(k) the next generation of preemption binds erisa plan administrators to a particular choice of rules for determining beneficiary status. 82. compare shaw, 463 u.s. at 96 ("the breadth of [section] 514(a)'s pre-emptive reach is 122. see id. in mackey, georgia had a general garnishment statute and an anti-garnishment bills were not enacted into law.60 workers will have in their 401(k) plans at retirement.34 benefits & emp. l. focus (white & case llp, new york, n.y.), aug. 2008, at 5, available at http://www.senatedems.ct.gov/pr/williams-080424b.html. provisions were intended to apply broadly.75 including shaw v. delta air lines, inc. and implied that the travelers case merely clarified the http://www.pionline.com/apps/pbcs.dll/article?aid=/20080804/printsub/892842826/1005 (last 46. commerce committee joint favorable report, supra note 12. 62. sandra j. matheson, washington state dept. of retirement systems, state's wrongful discharge law. as a result, this cause of action relates enrollment arrangements). http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selbilltype=bill&bill_num=971&which_ expenses would reduce your account balance at retirement by 28 percent. establish a uniform administrative scheme, which provides a set of changes can benefit all americans. visited oct. 24, 2009). to cover all employees, include automatic enrollment provisions in their contract or arrangement under section 408(b)(2) fee disclosure, a legislative and political history of erisa preemption, part 1, 14 j. of pension benefits 31, 32 require plans to be designed in a particular way. need for a universal compulsory pension system). economies of scale, and (3) standardization and other measures."47 2006, p.l. no. 109-280, 8/17/2006120 stat. 780 (2006). section 514(e)(1) provides that all state the u.s. supreme court adopted a new approach to determining politics of preemption led congress to pass a more ambitious slate of reforms than it might reach is apparent from that section's language. a law "relates to" an employee benefit and political history of erisa preemption, part 2, 14 j. of pension benefits 5, 10 (2007) ("[t]he 356 hofstra labor & employment law journal [vol. 26:355 pt. 2550). investments online, aug. 4, 2008, preempted due to the significant involvement of erisa plans. the state http://www.dol.gov/federalregister/documentlist.aspx?agencyid=8 (displaying 2009 documents leave benefits to workers who could not work as a result of pregnancy or other non-occupational other states that have considered retirement savings programs for problems with 401(k) plans, including issues relating to participation, the contribution of sufficient during retirement on which to live. benefit adequacy includes coverage one state has commissioned a study to look into 401(k) issues further.12 apply in its broadest sense to all actions of state or local governments, these issues are more pronounced with employees of small that no action was taken by connecticut's house of representatives. an act concerning small the connecticut general assembly stated that the "program this bill eric was discussing health care reform proposals, similar issues apply of state laws should be preempted by erisa. fees or benefit adequacy through laws that only impose an indirect rates to plans in their states. they could also help plans to present based on the amount of time those employees work in san francisco. id. at 642-43. the golden automatically revoked a spousal beneficiary designation upon the participant's divorce. id. at 143. promote uniform administration, which results in economies of scale and not mandatory, for employers to adopt and operate 401(k) plans. states in this article, "coverage" refers state start with one of the payroll deduction or ira options, bills were in order to provide for a uniform system. preempted because it could result in conflicting requirements.107 erisa."72 42. doug halonen, fee disclosure timetable met with some skepticism, pension & that congress intended for retirement plans to be exclusively within the investment earnings. 29 u.s.c. � 1002(34). the value of the account is reduced by expenses that guidance included regulations, revenue rulings, revenue procedures, notices, and announcements. 362 hofstra labor & employment law journal [vol. 26:355 the u.s. plan was critical to the law's existence where the law allowed plaintiffs associates of approximately 150 mid- to large-sized employers, 51% of benefit plans."155 58. governor jennifer granholm, 2006 state of the state address, working our plan, deferral of income would be considered an employee benefit plan for the report identified two types of (mass. 1982). as a consequence, not all issues, in that workers need to participate in order to have sufficient 4. the american heritage dictionary defines the term "relate to" in the way i think people of the washington statute on plan administration. id. at 149-50. the statute automatically revoked http://www.michigan.gov/documents/sos_2006_148708_7.pdf. 54. uvra update, states updates, supra note 10, at 3. failure to participate, to contribute enough, or to properly invest their employer . . . to the extent that by its express terms or as a result of year=2009&submit1.x=10&submit1.y=13&submit1=normal. other states that have assets. a report issued by the washington department of retirement thus, the legislative history for erisa indicates that erisa was to help ensure that workers have adequate retirement benefits. system. carasso & forman, supra note 9, 2-3. of labor, fiduciary requirements for disclosure in participant-directed individual account plans, 116. id. for terminating their employment was to avoid contributing to its retirement plan for them or paying according to a study by hewitt 28. erisa section 514(e)(2) uses the term "automatic contribution arrangement" and their constituents. in response to rising health care costs, particularly for future of 401 (k) plan fees, in new york university review of employee benefits and alternatively, explicit exceptions to its preemption rule, which implies that these are in addition to the significant amount of attention placed on these types of a look at 401(k) plan fees, u.s. dep't of labor (employee benefits security admin., 18. pratt, supra note 9, at 1102. the court has also held that state laws of general applicability are 1144(a) (2006). state laws are defined as "all laws, regulate in this area. potential approaches could include negotiating make payroll deposits into iras for employees who were not eligible to may still be considered erisa plans as a result of the broad definition 150. crenshaw, supra note 10. 86. id. at 654, 668. locations without having to worry about different plan provisions about certain fees paid by the plan.38 problem is attributable to employees who, for a wide variety of proposed regulations requiring fiduciaries to disclose fees to participants 355 any and all state laws insofar as they may now or hereafter relate to any 5. compare shaw v. delta air lines, inc., 463 u.s. 85, 98 (1983) (interpreting erisa's memorandum for the heads of executive departments and agencies, notices, 74 fed. reg. 4435 employees . . . . plans implementing automatic enrollment programs may increase their the dol, treasury and pbgc published considerable guidance http://mlis.state.md.us/2008rs/billfile/sb0728.htm. requiring employers to spend a greater amount of money on health care each state when making plan decisions. 76. id. (citing 120 cong. rec. 29,933 (1974)). erisa plans.134 adopt it for existing employees in 2009, compared to 27% in 2008.30 intended to replace current and future state laws that relate to employee plan sponsor make such contributions in an amount equal to a uniform percentage of compensation 95. id. at 132-33. proposed regulations, as well as nearly thirty requests to testify on the coverage, fees, and benefit adequacy.17 energy, and resources working with state legislatures and agencies to the state law would consider."63 assume that you are an employee with 35 years until retirement and a current 401(k) despite this, the u.s. supreme court's to the amount of workers who have access to and elect to participate in 69. see district of columbia v. greater wash. bd. of trade, 506 u.s. 125, 129-30 & n.1 private pensions: low defined contributions plan savings may pose challenges to certain types of state laws are not preempted, even if the relate to organizations that represent varying interested parties with respect of plans and laws that would aggregate plans may be preempted even the dol also received nearly one hundred comments on its regulating service providers to 401(k) plans. nearly thirty requests to testify on the issue.144 2. mandatory design or administration 31. automatic ira bill of 2007, h.r. 2167, s. 1141, 110th cong. � 408b(a) (2007). conflicted with the statute. id. at 149-150. erisa requires fiduciaries to act in accordance with their laws in this way. that is, states will attempt to argue that their laws http://www.cga.ct.gov/asp/cgabillstatus/cgabillstatus.asp?selbilltype=bill&bill_num=971&which_ erisa plan if the law acts immediately and exclusively on an erisa however, the court held that the anti-garnishment statute was preempted because it "expressly opportunities to improve the 401(k) system. however, ideas to improve prior to retirement, or choose not to participate in a pension plan at all, appears relatively straightforward,4 laws lacked meaning without the existence of erisa plans. therefore, 66. erisa � 514(c)(1), 29 u.s.c. � 1144(c)(1). by employees for periods extending to the termination of covered began to consider and adopt "fair share" laws, designed to have 135. 532 u.s. 141, 148 (2001) (quoting fort halifax packing co. v. coyne, 482 u.s. 1, 9 surcharges for patients insured by blue cross/blue shield plans. id. several commercial insurers attempt [in shaw] to construe the phrase "relate to" does not give us much help drawing the growing realization is that a significant portion of the population the first state to pass legislation to create a state-administered 401(k) plan. press release, state sen. some states' views of the proposed regulations are likely to differ determine whether the named beneficiary's status has been "revoked" by operation of 22. patrick purcell, retirement plan participation and contributions: trends years average 7 percent and fees and expenses reduce your average returns by 0.5 participation. the increase is most pronounced among employees whose participation maryland's pay or play law was preempted by erisa.15 or any instrumentality thereof, which have the force or effect of law.76 west virginia.61 requirements."137 emption would never run its course, for "[r]eally, universally, relations stop nowhere . . . help them understand the practical impacts of state legislation on 401(k) 2009] the next generation of preemption cases 369 124. for example, in rila v. fielder, the maryland secretary of labor, licensing, and published over forty documents in the federal register in 2008.147 the uninsured, several states and local governments passed laws that contract or arrangement under erisa section 408(b)(2),143 the pension benefit guaranty corporation ("pbgc") to facilitate as well as proposed regulations to increase c. statutory exceptions to preemption retirement income security act (erisa), and legal issues to refers to--indeed, solely applies to--erisa employee benefit plans." id. at 828 n.2, 829. if they would subject plan administrators to conflicting requirements.103 blue cross & blue shield plans v. travelers ins. co.84 circuit court of appeals held that maryland's "pay or play" law was preempted by erisa. retail recover in a wrongful discharge action if they could establish that the employer's principal reason this issue.158 state laws that provide for negotiation of fees by the state on behalf a. legislative background plans, such as 401(k) plans. fiduciaries would be required to make these disclosures in order to the u.s. supreme court stated that erisa's preemption securities. 8. stephanie l. freid, u.s. seniors face increased poverty budget woes hit women, 2009] the next generation of preemption cases 383 41 j. marshall l. rev. 1091, 1120 (2008) (discussing risks relating to coverage and benefit id. at 150. 114. id. at 660. 25. id. 157. see employment retirement income security act (erisa) of 1974 � 514(e), 29 u.s.c. � employee benefit plans and "[bore] indirectly but substantially on all insured benefit plans, for it 401(k) plan, like the state's plan, for those workers of small companies hospitals were also required to collect surcharges from patients covered by a commercial insurer, consequently, states are likely to consider ways in which they can accounts, which numerous states have considered.150 128. 471 u.s. 724 (1985). provided to their constituents through 401(k) plans will pass legislation fielder, 475 f.3d 180, 188 (4th cir. 2007). the fourth circuit court of appeals rejected this massachusetts, maryland, suffolk county, and the city of san francisco. they have also been erisa also indicates that a law of the united hb 4135. s. 0024, 94th leg., reg. sess. (mich. 2007); h.r. 4135, 94th leg., reg. sess. (mich. states' approaches to health care reform are strong indicators of different legal obligations in different states.135 disclosures, but these have not been finalized at the time this article the article analyzes erisa's preemption provisions, the supreme area. numerous concerns have been expressed in recent years about http://bulletin.aarp.org/yourmoney/retirement/articles/state_savings_plans.html; economic business retirement plans, bill status report for substitute for raised s.b. no. 971 workers or alternatively, make payments to the government (known as them in their mother's will. id. at 836-37. the participant's second wife also claimed an interest 89. see, e.g., shaw, 463 u.s. at 100 n.21; mackey v. lanier collection agency & serv., inc., value of the participant's account balance at retirement.35 33. id. at � 408b(b)-(c). was preempted by erisa. id. at 642. the ninth circuit court of appeals ruled that the ordinance 3. benefit adequacy obligations. purchase[d] a certain kind of common insurance policy." id. at 739. state law was not preempted and explained that "[a]ny state tax, or other law, that increases the cost resident. as a result, a worker who was transferred (or requested a are taxes124 attempting to avoid erisa preemption). year=2009&submit1.x=7&submit1.y=10&submit1=normal (last visited oct. 24, 2009). commonly think of this phrase. that is, it includes the following as possible definitions for "relate sponsors would need to understand the different rules associated with the significance of plan fees on retirement assets and the attention that disabilities. id. at 88. the court framed its role for preemption purposes as determining congress' plans to include automatic enrollment provisions or mandating that 97. id. at 60 (citing fort halifax packing co. v. coyne, 482 u.s. 1, 10 (1987)). supreme court on june 6, 2009. the u.s. supreme court asked the opinion of the solicitor accordance with how they are normally used, erisa preempts state laws that have a demonstrable breadth of erisa's preemption provisions. id. at 655. the court stated: companies, that is, employers with fewer than 100 workers. in 2007, retirement.7 them."114 401(k) plans have garnered national attention as they have become items of guidance relating to retirement plans in addition to treasury place substantial burdens on state governments to provide for them in employer's defined contribution pension plan (such as a 401(k) plan).45 the legislative history for erisa's preemption provisions indicates the phrase "relate to" should be interpreted broadly in preemption provisions broadly with respect to 401(k) plans in order to state laws that regulate insurance, banking or securities (known as the disclosures to 401(k) plan participants--rfi, http://www.dol.gov/ebsa/regs/cmt- 78. id. at 64 (1990) (citing alessi v. raybestos-manhattan, inc., 451 u.s. 504, 523 (1981)). in order to increase the amount of workers covered by 401(k) plans, would be to ignore the remainder of [section] 514."83 plans and state laws of general applicability. minorities hardest, newsdesk.org, sept. 19, 2003, holliday, 498 u.s. 52, 60 (1990); boggs v. boggs, 520 u.s. 833, 841 (1997). and federal laws and avoid entangling plans in legislation regarding the applicability.122 32. id. a guaranteed benefit, and the limited opportunity for redress against plan fiduciaries); adam 2008). the san francisco health care security ordinance currently requires employers that engage participant and a pre-determined percentage will be deferred on a pre-tax uniformity in the administration of plans, which would not be possible percentage or opts out of participation.28 plan to conflicting rules regarding the determination of the participant's a uniform system for plan design and administration, for workers to be retirement savings. can negotiate with the service providers to the state plans to offer similar order to facilitate the uniform design and administration of erisa plans, 1. 29 u.s.c. �� 1001-1461 (2006). mar08.pdf?sequence=1 [hereinafter uvra update, state updates]; economic opportunity under the terms of the plan. id. the court held that "[i]n the face of this direct clash between state 2009] the next generation of preemption cases 379 stakeholders such as the economic opportunity institute (eoi), has workers participate in the plans.22 state approaches will cause employers and providers to flee from states the court has held that state pbgc, most interested individuals and organizations monitor all types http://www.pbgc.gov/about/wrfaqs.html what types (discussing that "pbgc does not insure thus, state laws can avoid preemption if they regulate insurance, the washington state legislature directed the department of economic impact on 401(k) plans or laws of general applicability. 143. reasonable contract or arrangement under section 408(b)(2)-fee disclosure, 72 fed. subject to regulation by the pbgc, it appears that most interested individuals and organizations however, mandatory automatic enrollment would likely be he does not believe that the proposed regulations are adequate and has accounts program, such as a defined contribution plan, to be made 68. see alessi v. raybestos-manhattan, inc., 451 u.s. 504, 522-23 (1981). provide participants with adequate retirement benefits.43 plans by the media, state politicians' constituents will suffer the (2008), http://mlis.state.md.us/2008rs/billfile/hb1228.htm; see also md. gen. assembly, 2008 plans or alternatively, mandate that employers without 401(k) plans ."79 1. act on erisa plans or where erisa plans are essential workers who participate in the plans (known as participants).9 108. n.y. state conference of blue cross & blue shield plans v. travelers ins. co., 514 u.s. although the automatic ira bill of 2007 was never enacted, states may considered by several other states. see national conference of state legislatures, 2006 as well as 2009] the next generation of preemption cases 359 (62.2%) worked for employers that sponsored retirement plans--either pensions or 401(k)-type with state laws that mandated actions by or features in erisa plans that b. supreme court's interpretation of "relate to" b. fee issues however, states may be able to indirectly influence 401(k) plans by 35. the dol publication provides the following example: labor, federal register documents for ebsa, where they are located near the border of a state. id. at 96-98 (citing consumer product safety comm'n v. gte sylvania, inc., 447 u.s. 102, 108 for workers whose employers sponsored a defined contribution organizations.145 recognized the potential impact inadequate retirement preparedness 79. id. at 65 (citing 120 cong. rec. 29,942 (1974) (remarks of sen. javits)). when administering erisa plans. it stated: the court has set forth several principles regarding the at the crux of the saving clause is what it means to regulate "expressly refers to--indeed, solely applies to--erisa employee retirement accounts ("iras") or voluntary defined contribution plans. this article argues that the federal government is optimally suited able to transfer among their companies' locations, and for interested circumstances under which state laws are preempted will likely permit any licensed chiropractor who agreed to their terms and conditions to serve as a participating however, among the companies that do not offer