The state of ERISA after 35 years: complex, yet arguably simplistic, which federal statute may be unraveled with a touch of supreme common sense.

• Author: Muniz, H. Michael

1. Introduction II. Generally, ERISA Pre-empts All State Laws That Relate to Employee Benefit Plans III. While Broad in its Reach and Scope, ERISA's Pre-emption Clause Is Not Unlimited IV. ERISA and the High Court's Own ERISA Pre-emption Jurisprudence Has Left Much to be Desired V. Conclusion I. INTRODUCTION

   The United States Supreme Court has often observed the federal Employee Retirement Income Security Act is "a comprehensive and reticulated statute," (2) which the United States Congress adopted after a careful, decade-long study of private retirement pension plans. (3) Overall, the purpose of the Employee Retirement Income Security Act of 1974, most commonly known as ERISA, was "to provide a uniform regulatory regime over employee benefit plans." (4) As such, ERISA was enacted as the center piece of federal substantive law to be enforced and, thereafter, developed by the courts, through a federal common law of rights and obligations under ERISA-regulated welfare benefit plans. (5) Although the U.S. Supreme Court has determined that "ERISA's definition of an employee welfare benefit plan is ultimately circular," it has applied a "common [sense] understanding of the word 'plan.'" (6) "The federal Employee Retirement Income Security Act of 1974 ... as amended, 29 U.S.C. [section] 1001 et seq. (ERISA), comprehensively regulates employee pension and welfare plans." (7) An employee welfare-benefit plan or welfare plan is defined as one which provides to employees "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability or death," whether these benefits are provided "through the purchase of insurance or otherwise." (8)

   "In enacting ERISA, Congress's primary concern was with the mismanagement of funds accumulated to finance employee benefits and the failure to pay employees benefits from accumulated funds." (9) Effective January 1, 1975, (10) ERISA was intended to protect both the interests of participants in employee benefit plans and their beneficiaries. (11) "One of the principal goals of ERISA is to enable employers 'to establish a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits.'" (12) In fact, "ERISA requires every employee benefit plan to be established and maintained pursuant to a written instrument, specifying the basis on which payments are made to and from the plan." (13)

   Insofar as Congress's intent, the ERISA [F]ederal statute does not go about protecting plan participants and their beneficiaries by requiring employers to provide any given set of minimum benefits, (14) but instead controls the administration of plan benefits as by imposing reporting and disclosure mandates, participation and vesting requirements, funding standards and fiduciary responsibilities for plan administrators. (15) It is clear that ERISA was also intended to have a federal regulatory effect on "the health care industry, which is, by definition, the realm within which ERISA welfare benefit plans must operate," (16) even though Congress chose not to displace general health care regulation that has historically been a matter of state or local concern. (17) "To this end, ERISA includes expansive preemption provisions, which are intended to ensure that employee benefit plan regulation would be 'exclusively a federal concern.'" (18) "Therefore, any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." (19) If a state law conflicts with the provisions of ERISA or operates to frustrate its object, that inquiry and affirmative answer, alone, will resolve the case. (20) "In the face of ... direct clash between state law and the provisions and objectives of ERISA, the state law cannot stand." (21) Even complaints purportedly raising only state law causes of action may necessarily be federal in character so as to be preempted. (22) Notably, "[c]ommon-law rules developed by decisions of state courts are 'State law' under ERISA." (23)

   Given ERISA's expansive pre-emption provisions, civil actions brought in a state court may be removed to federal court if the case is one in which the federal court has original jurisdiction, such as when the case raises a federal question arising under the U.S. Constitution, laws, or treaties of the United States. (24) Whether or not a pleading raises a federal question is a determination normally turning on the well-pleaded complaint rule. (25) In the context of many common law rules, including the well-pleaded complaint rule, courts have carved out exceptions. (26)

   When a federal statute wholly displaces the state-law cause of action through complete pre-emption, the state claim can be removed. This is so because when the federal statute completely preempts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law. ERISA is one of these statutes. (27) "Thus, the ERISA civil enforcement mechanism is one of those provisions with such extraordinary pre-emptive power that it converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule." (28) In fact, "a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint." (29) "[A]n ERISA pre-emption defense provides a sufficient basis for removal of a cause of action to the federal forum notwithstanding the traditional limitation imposed by the 'well-pleaded complaint' rule." (30) Accordingly, because it was Congress's intent to occupy the field of law concerning employee pension and welfare benefit plans, (31) state law claims will invariably be removed by knowledgeable litigators to a federal forum, when appropriate. Indeed, perhaps the crowning achievement of the 1974 ERISA legislation was "the reservation to Federal authority the sole power to regulate the field of employee benefit plans." (32)

2. GENERALLY, ERISA PRE-EMPTS ALL STATE LAWS THAT RELATE TO EMPLOYEE BENEFIT PLANS

   "ERISA pre-emption analysis must be guided by respect for the separate spheres of governmental authority preserved in our federalist system." (33) Respect for the separate spheres of governmental authority notwithstanding, ERISA preempts all state laws and state-law causes of action insofar as they relate to employee benefit plans, (34) except for state laws that regulate insurance, banking or securities, which are saved from pre-emption. (35) "The basic thrust of the pre-emption clause ... was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans." (36)

   The preemption clause... [E]stablishes as an area of exclusive federal concern the subject of every state law that "relates to" an employee benefit plan governed by ERISA. The saving clause returns to the States the power to enforce those state laws that "regulate insurance," except as provided in the deemer clause. Under the deemer clause, an employee benefit plan governed by ERISA shall not be "deemed" an insurance company, an insurer, or engaged in the business of insurance for purposes of state laws "purporting to regulate" insurance companies or insurance contracts. (37) "Legislative 'good intentions' do not save a state law within the broad pre-emptive scope of [section] 514(a)." (38) "Pre-emption is also not precluded simply because a state law is consistent with ERISA's substantive requirements." (39) Thus, ERISA is like "using a sledgehammer to kill a gnat," (40) when faced with contradictory or even consistent state law or causes of action that relate to an employee benefit plan. (41) A state statute, however, may permissibly relate to employee benefits, such as payment of severance, as opposed to an employee benefit plan, and not run afoul of ERISA's pre-emption provisions. (42)

   Congress intended pre-emption to afford employers the advantages of a uniform set of administrative procedures governed by a single set of regulations. This concern only arises, however, with respect to benefits whose provisions by nature requires an ongoing administrative program to meet the employer's obligation. It is for this reason that Congress pre-empted state laws relating to plans, rather than simply benefits. Only a plan embodies a set of administrative practices vulnerable to the burden that would be imposed by a patchwork scheme of regulation. (43) For example, to fall under ERISA's "except for" saving clause, a state law must be specifically directed toward the insurance industry, as opposed to laws having only general applicability that have some bearing on insurers, which would not qualify. (44) The "saving clause [also] retains the independent effect of protecting state insurance regulation of insurance contracts purchased by employee benefit plans." (45) "At the same time, not all state laws specifically directed toward the insurance industry will be covered by [section] 1144(b)(2)(A), which saves laws that regulate insurance, not insurers." (46) "ERISA's saving clause does not require that state law regulate 'insurance companies' or even 'the business of insurance' to be saved from pre-emption; it need only be a 'law ... which regulates insurance'...." (47) Thus, it should be clear that "Congress did not intend to preempt entirely every state cause of action relating to such plans." (48) The critical or crucial question for a court, then, is to determine where the line of demarcation exists between those state laws that are preempted by ERISA and those state laws that are saved from ERISA pre-emption. (49)

   Furthermore, ERISA's aptly-named "deemer clause" provides that an employee benefit plan covered by ERISA may not be deemed to be an insurance company...