By James A. Klein

“They don’t make them like they used to.” One might say this about houses or refrigerators or ballplayers. But the same might be said for legislation. As tax and benefits law continues to advance through a halting series of temporary and partisan budget bills, we who work within the employee benefits system continue to be governed by sage legislation from 50 years ago.

The Employee Retirement Income Security Act (ERISA), signed into law on Labor Day, 1974, was designed most explicitly as a direct response to several high-profile incidents involving poorly funded and mismanaged pension plans.

However, in the course of establishing basic fiduciary standards for retirement plan sponsors and protections for employees, ERISA’s framers had the wisdom and foresight to extend these standards to employer-provided health plans as well. While ERISA is mostly associated with large, self-funded health plans, there are several provisions of this federal law – notably those that relate to claims denials and appeals – that also apply to fully insured health plans that in most respects are regulated by states. The absence of the word “health” in the proper name of the law was never meant to suggest that it is not equally applicable to employer-sponsored health benefits.

EARISA was a triumph of bipartisan lawmaking and shared responsibility, having helped both health and retirement plans thrive over generations. Its essence – the framework that gives it purpose – is its federal preemption standard, which establishes the federal government as the sole regulator of self-funded employer-sponsored health benefits. This preemption language, described by its authors as the “crowning achievement” of the law, provides a uniform national framework within which employers can operate their benefit plans. It also ensures equitable benefits for an employer’s workforce wherever in the United States its employees perform their jobs.

Calling ERISA a “landmark” is particularly apt. It is the constant by which employer plan sponsors navigate the winding roads of benefits policy. Today, virtually every benefits professional, attorney or consultant has spent their entire career in employee benefits with ERISA as the foundation of the work they perform.
One of the things you have to worry about with aging structures, though, is erosion. See the Egyptian pyramids, the Greek Parthenon or Fenway Park. Sometimes, this erosion is environmental. Sometimes, it is man made. In the case of ERISA, it is both.

To meet the demands of constituents – and because congressional gridlock has thwarted federal action – numerous states, cities and localities have sought to impose their own new employee benefit standards, thereby “piercing the veil” of preemption – or bypassing it entirely. This action, however well-meaning, erodes ERISA’s authority over both the health and retirement plans. These state efforts must therefore be closely scrutinized, because when this authority is diminished for one, it is diminished for all.

Without ERISA uniformity, employers would have to comply with numerous inconsistent and even contradictory state laws; making plans extraordinarily difficult to administer. This could result in increased costs and administrative burdens for employer-sponsored plans and cause employees performing the same job for the same employer, albeit in different locations, to receive very different benefits. Employers could also face increased litigation risk in multiple venues from a smorgasbord of state-law claims.

Furthermore, without ERISA preemption, employers would not be able to leverage economies of scale that nationwide plan design, administration and negotiation affords. Without ERISA preemption, employers could not provide a consistent employee experience, which in turn would create greater confusion, complexity, and cost for both employees and employers.
ERISA was intended to make plan design, administration and participation easier. That is why the employer community is now engaged in a kind of conservation project – to preserve, protect and defend ERISA before it crumbles.

President Biden is the only currently active federal government official who voted for ERISA in 1974. And, of course, he soon will be concluding his public service. So we in the benefits world need to continually educate today and tomorrow’s lawmakers and regulatory officials of both political parties about the vital importance of ERISA generally and its federal preemption provision specifically.

The bipartisan support ERISA and federal preemption enjoyed when the law was enactment and during its early years is continually tested. Many Democrats are frustrated that requirements for higher benefits or greater protections have not been become law at the federal level and so they defer to – or even actively support – states taking the lead. On the other side of the aisle, Republicans are philosophically aligned with greater state and local authority and therefore need regular reminders that a federal approach to health plan operations is vital for nationwide employers and their employees.

We live in complicated times. But that is all the more reason to hold on to the familiar landmarks upon which we rely.

Klein is president of the American Benefits Council, a Washington D.C.-based employee benefits public policy organization. The Council advocates for employers dedicated to the achievement of best-in-class solutions that protect and encourage the health and financial well-being of their workers, retirees and their families.