Center on State Initiatives (CSI)

Advocating Federal Solutions to State and Local Benefit Requirements

The ability of employers operating in multiple states to administer benefits uniformly should be vigorously protected. A cornerstone of ERISA is its preemption of state laws that relate to employee benefit plans. This principle has been instrumental in the growth of employee benefit plans. For large employers, it allows them to design benefit programs that apply uniformly to employees in multiple states and are subject to a single set of federal standards and requirements, making the administration of these plans far more feasible and cost-effective. Congress, the Supreme Court, and the Department of Labor have vigorously upheld and enforced ERISA’s preemption provision for more than 40 years.

As partisan gridlock in Washington has increased and federal legislation governing employee benefits has stalled, various states have undertaken their own measures to address perceived gaps in coverage. Many of these state laws impose new mandates on employers, despite the federal uniformity standard established by ERISA. The Council is working to address the many concerns that multi-state employers have about these mandates and the potential for disruption to their benefits programs.

This section of the Council website provides information and analysis of state laws that may affect employers and possible federal solutions to address these challenges. Council staff is also available to provide detailed one-on-one analysis with members using the contact information below.

Health: State Innovation Waivers   |   Health: State Taxes   |   Health: Reporting Requirements   |   State-Based Retirement Plans   |   Paid Leave

 

ACA Section 1332 State Innovation Waivers

Issue
ACA section 1332 authorizes the Secretary of the U.S. Department of Health and Human Services (HHS) and the Secretary of the U.S. Department of Treasury to waive all or any of the following rules for plan years beginning on or after January 1, 2017: (1) qualified health plan standards; (2) exchange rules; (3) individual premium subsidies and small employer tax credits and (4) employer and individual responsibility standards.

While HHS has been granted significant flexibility under the ACA by Congress to regulate coverage, it is critical that this flexibility be exercised in a manner that does not adversely affect employer-sponsored coverage. Unless the state waiver process is properly and carefully administered, state waivers could undermine the uniform design and administration of employer plans and could impose excessive costs on employers in those states where waivers are granted. To ensure the employer-sponsored system is adequately protected, these waivers should only be extended to state action-related to the individual market. Waivers should not allow states to regulate the design and administration of ERISA plans by imposing new definitions of "minimum essential benefits," employer shared responsibility or reporting requirements.

Solution
The Council strongly recommends that HHS to take steps, as part of its review and approval of state waiver applications, to ensure that employer-sponsored coverage — including ERISA preemption — is not weakened by the Section 1332 waiver provisions. Otherwise, these waivers could be a means to circumvent Employee Retirement Income Security Act ("ERISA") preemption, which, in turn, could erode long-standing interests in, and recognition of, the need for national uniformity for ERISA-governed plans.

For more information
Ilyse Schuman, senior vice president, health policy
Kathryn Wilber, senior counsel, health policy
202-289-6700

Back to top

 

State Tax Assessments for Health Programs

Issue
Several states have imposed (or considered) taxes on employers to fund insurance reinsurance programs, Medicaid or subsidized exchange coverage, vaccine purchasing and other health programs. Most recently, these include proposed fees in Louisiana to fund a state reinsurance fund and temporary employer assessments in Massachusetts to address increasing cost of Medicaid and other subsidized health care coverage. This trend is likely to accelerate as federal policymakers are increasingly gridlocked on health care issues.

Employers are subject to certain “employer shared responsibility” requirements under the Affordable Care Act (ACA) and failure to offer compliant health coverage risks substantial federal penalties. The Council has serious concerns regarding any proposed fees, taxes or other assessments that states or local governments might seek to impose directly or indirectly on employer-sponsored group health plans. Such action would undermine the uniform regulatory framework under ERISA and would ultimately increase costs of self-insured health benefits coverage in the form of higher administrative costs. Plan participants could also be affected through increased out of pocket costs, including higher deductibles, co-pays or co-insurance.

Solution
The Council engages in legislative, regulatory and judicial advocacy to preserve ERISA’s uniform regulatory framework. This advocacy includes engagement with state or localities to oppose fees or taxes imposed directly or indirectly on self-insured employer group health plans.

For more information
Ilyse Schuman, senior vice president, health policy
Kathryn Wilber, senior counsel, health policy
202-289-6700

Back to top

 

State Health Plan Reporting Requirements

Issue
In Gobeille v. Liberty Mutual Insurance Company, the U.S. Supreme Court struck down a Vermont law requiring all health plans (including self-insured plans) to file informational reports (including claims data) for the state’s all-payer claims database, finding that the state law was preempted by ERISA.

However, Vermont still may seek to revise its law to restore the requirement and additional states have adopted or are considering all-payer claims databases, many of which have conflicting and overlapping reporting requirements with respect to the content and format of data reporting.

Solution
The American Benefits Council filed an amicus (“friend of the court”) brief with the U.S. Supreme Court describing the importance of ERISA preemption as it applies to self-funded employers, arguing that the Vermont law and similar state programs undercut ERISA’s objectives by subjecting self-insured plans to a morass of state reporting requirements that Congress neither intended nor allowed in enacting ERISA.

For more information
Ilyse Schuman, senior vice president, health policy
Kathryn Wilber, senior counsel, health policy
202-289-6700

Back to top

 

State-Based Retirement Programs for Private-Sector Workers

Issue
A number of states have passed (or are considering) legislation to require private-sector employers that do not sponsor retirement plans to provide payroll deduction contributions into a state-sponsored retirement plan.

Although these state initiatives are generally intended to apply to small employers that do not sponsor a retirement plan, these measures have the potential to impose related responsibilities on larger employers with respect to employees who are not eligible for the employer-sponsored plan. These state initiatives could also potentially erode ERISA’s preemption standard, disrupting multi-state employer plans that rely upon a strong federal framework. 

Under the Obama Administration, the U.S. Department of Labor (DOL) had finalized regulations formally authorizing the establishment of such state programs and had finalized regulations permitting large cities and counties to do the same. While Obama Administration rules exempting state-run retirement plans from ERISA have been invalidated under the Congressional Review Act, some states and municipalities are moving forward with their programs. 

Solution
The Council is committed to ongoing legislative, regulatory and judicial advocacy to resist efforts to erode ERISA’s federal preemption standard. The Council has developed a set of principles for state-run retirement savings arrangements for private sector workers. Although ERISA preemption should already apply to state laws affecting qualified retirement plans, the Council may consider alternative solutions such as a voluntary federal standard that would clearly preempt state laws that mandate participation in state-run retirement savings arrangements, similar to the voluntary automatic enrollment provisions of the Pension Protection Act which preempted state garnishment laws. 

For more information
Jan Jacobson, senior counsel, retirement policy
Lynn Dudley, senior vice president, global retirement and compensation policy
202-289-6700

Back to top

 

State Paid Leave Mandates

Issue
Several states have already enacted programs mandating paid leave for private-sector employees. Common features of these state mandates include administration through state unemployment agencies, payroll taxes to finance the program (i.e. premium payments), qualification and permitted leave standards and benefit amounts.

However, many of these mandates have unique features and multi-state employers may find the lack of uniformity to be a significant administrative challenge. Such requirements and conflicts would have a significant impact have on companies’ benefits and compensation policies.

Solution
The Council’s Board of Directors has established a dedicated task force to examining this issue. In the absence of federal law preempting state and local paid sick leave statutes, the Council has encouraged the National Conference of State Legislatures to take a leadership role in encouraging a more concerted approach to the design and enactment of paid leave laws, perhaps through the adoption of model acts and regulations. At a minimum, lawmakers should pursue the development of consistent terminology to be used by states and localities when enacting paid leave laws.

For more information
Diann Howland, vice president, legislative affairs
Lynn Dudley, senior vice president, global retirement and compensation policy
202-289-6700