The Federal Employee Retirement Income Security Act (ERISA) Employee Retirement Income Security Act (ERISA) is an American federal statute that was established in 1974. The Act establishes minimum m required standards relating to pension plans in private sector. The passage of ERISA by the congress paved way for promotion of employee’s interests and their close associates such as family members. This is achieved through establishment of employment benefit plans which calls for contributions made by the employees. ERISA provides requirements for health care benefit plan participation, vesting and funding of benefits.
The scheme provides uniform standards of plan reporting, fiduciary duties, disclosure and protection of multi-state employers from state regulation. The laws only apply to employee welfare plans such as health care plans. However, it does not apply to government plans, compensation for unemployed, foreign plans, disability insurance or plans that are established for purpose of complying with workers compensation act. The private sector is the main beneficiary of ERISA as it regulates benefits plans of private employers.
Comprehensive statutory regulation plans laid down by ERISA targets over eighty-five percent of non-elderly employees (Dean, 2000). The American employees benefited by this scheme have private health insurance that exists through benefit plans. The laws established by their Congress in relation to ERISA have impact on employee benefits such as health care. It relates to employee welfare benefit plans offered through insurance or self-funded arrangement. Both the private sector and unions with exemption of the church are beneficiaries to this scheme.
The desire to protect private sector from misappropriation of employee benefit plans made the Congress to endorse ERISA. The private sector made it difficult for individuals to access their benefits. Failure by employers to fund employee benefit plans affected the lives of many individuals. A good example to reflect the effect of mismanagement of pension funds was the case in which Studebaker Automotive plant was closed in 1963. Over ten thousand employees were unable to receive their pension benefits due to lack of funds.
The failure of pension funds forced the federal government to protect its citizens from unexpected loss of benefits. The congress enhanced the enactment of ERISA which provided uniform set of federal regulations that protected employee benefit plans. One major component that lacked in provision of federal labor laws was uniform application of regulations. To achieve uniformity, the Congress included express preemption provision in ERISA. Insertion of the preemption clause meant superseding of any state law that relates to employee benefit plan.
The ability of government to exercise its authority in preempting states regulation of private employee administration has led to improvement in provision of pension funds. This is one of the most humble steps that have led to protection of laws that govern service provision by ERISA. States are blocked by existence of laws from interfering with Employee Retirement Income Security. ERISA preemption is one relevant health reforms pursued by a number of states to protect the health of employees. A dominant initiative in ERISA litigation is preemption of state legislation which interferes with administration of private health plans.
In the past a number of states have been pursuing health care reforms but political influence is considered as a major drawback. ERISA preemption clause is seen as a complicated matter for state lawmakers with an objective of reforming the health care system. The clause states that ERISA has the power to supersede al state laws which relates to employee benefit plans (Stiefel, 2007). However, a conflict arises between state reforms and ERISA as they are directly o indirectly related to employee benefit plans.
States have no power to force employers incur costs of health insurance, enforce terms of ERISA plan, impose direct tax on benefit plans or demand for plan sponsors with an objective of reporting information about plans offered . ERISA has no authority to preempt state laws concerned with regulation of business insurance. The legal systems have interpreted this to imply that states can enforce laws that relate to insurance practices. States thus can impose benefit requirements in relation to health benefit plans purchased by employers. However, the power to enforce such laws does not involve self funded plans.
ERISA provides that self funded plans are different from insurance according to provisions of the law. A recent enactment in healthcare reforms was the case of “fair share” enacted by Maryland; this enactment required that organizations with more than ten thousand employees should contribute eight percent of their salary to health benefits plans. This was made with a view of helping the poor who are unable to pay for their own medical bills. In the real sense the law was applied to Wal-Mart but Retail Industry Leaders Association (RILA) was against such provisions.
RILA sued for such enactment arguing that it violated ERISA’s provisions. The U. S Court of Appeals for Fourth Circuit upheld the ruling after considering that ERISA preempts the law. The ruling provided that the enactment was unenforceable as it had certain implications in plan administration. Certain initiatives deemed to service an ERISA preemption challenge include broad based state tax, or assessments to fund public health coverage initiatives. Such programs deemed appropriate include single payer or premium subsidies provided for low income earners providing credits for health care spending (Bartholomew, 1999).
Tax on ERISA plans is subject to preemption but tax on employers, providers or insurers can be permissible. This is only possible when it is done under states general taxation powers but not directly related to ERISA plans. ERISA preempts state laws relating to employee benefit plan, considers employee benefit plans as non-insurance policies and saves laws relating to insurance from preemption. Kentucky Health Plan Assoc. versus Miller, 538 U. S 329 case is a good example that relates to business of insurance regulation.
The court held that ERISA does not preempt state laws with remote, tenuous or peripheral connections with covered plans. However in the case that state law in question relates to plan administration such as processing of claim or determination of eligibility the court rules that ERISA has preemption rights. This is in line with Congress goals of minimizing plan administration problems and encouragement of employers to provide employee benefit plans to employees. The court also held in the case of Pilot Life Ins. Co, versus Dedeaux 1987 that the congress had an intention of making ERISA’S civil remedies to be exclusive.
Under ERISA a plaintiff is entitled to first, recover benefits which are due under the existing terms of the plan such as having a claim denial reversed and providing full coverage. Second, he or she is entitled to enforce rights under a laid down plan. Third, the plaintiff is supposed to receive a clarification of rights for future benefits under a given health care benefit plan. The three provisions relates to administration plans which are enforced by the department of Labor. The Congress has power to grant ERISA waiver for instance a state implementing exclusive or broad health care reforms. In 2007, the U. S Court of Appeals for Fourth Circuit upheld the ruling given by a Federal judge who had nullified Maryland Far Share Health Care law.
The judge gave the ruling holding that ERISA preempts the case (Retail Industry Leaders Assoc. versus Fielder) (Harllelson, 2008). The court found that Maryland’s law effectively required employers to restructure health insurance plans relating to employees conflicted with ERISA’s role of uniform administration of benefit plans. It was also found that the establishment of law aimed at acting as penalty for failure to provide certain benefits but not tax to raise revenue.
Considering the two provisions thus supported ERISA’s capacity to prohibit the power of state in enforcing how employers are supposed to develop their ERISA plans. ERISA provides a number of permissible actions with design characteristic features of state pay law which should help a state defend such laws against its preemption challenge. First, employers are not supposed to offer health coverage to its employees. Second, taxes should be charged on employers but not employer sponsored plans. Third, when an employer pays tax does not amount to a prerequisite that his or her employees qualify for coverage under public program.
Fourth, a universal coverage program funded in part with employer tax should be established. In this aspect publicly funded coverage programs should use funds from taxes paid by all employers. Fifth, conditions on employer’s health plans should be imposed for purpose of tax credit. References Bartholomew, K. (1999). ERISA Preemption of Medical Malpractice claims in Managed Care: Asserting a New Statutory Interpretation. Vanderbilt Law Review, Vol. 52. P. 13-19 Dean, R. G. (2000).
ERISA Basics: Preemption American Bar Association. Retrieved on August 3, 2010 from http://www. bna.com/bnabooks/ababna/annual/2000/paris. pdf Harrlelson, L. A. (2008). Retail Industry Leaders Association v. Fielder: ERISA Preemption trumps the “Play or Pay” Law. Maryland Law Review. Vol. 67, No. 885, p. 885-912. Retrieved August 3, 2010 from http://www. law. umaryland. edu/academics/journals/mdlr/print/articles/67-885. pdf Mallen, R. (2001). Attorney Liability under ERISA: Myth or Reality? Defense counsel Journal, Vol. 68, p. 10-14 Stiefel, (2007). ERISA Preemption of Chapter 58: the Future of the “Pay or Play” Model of Health Care Legislation. American Journal of Law and Medicine, Vol. 33, p. 6-17