Center on State Initiatives (CSI)

Advocating Federal Solutions to State and Local Benefit Requirements

The ability for employers operating in multiple states to administer benefits uniformly should be vigorously protected. A cornerstone of ERISA is its preemption of any state law that relates to an employee benefit plan. This principle has been instrumental in the growth of employee benefit plans. For large employers, it allows them to design benefit programs that apply equally to employees in multiple states and are subject to one uniform set of standards and requirements, making the administration of these plans far more feasible and cost effective. All three branches of the federal government (Congress, the Supreme Court, and the Department of Labor) have vigorously protected 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 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 – as well as suggested 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 1132 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.

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. This would conflict with the stated goals of the ACA to expand health coverage and make it more affordable to consumers. Most importantly, there is a concern that a waiver of the employer mandate would only be warranted if a state had its own substitute mandate, which then might allow a state to impose requirements on self-funded employer-sponsored health plans. Clearly, this would erode ERISA preemption and a uniform scheme of regulating employer plans.

Solution
The Council proposes eliminating the waiver program entirely, allowing states to pursue their own standards through the exchanges and state insurance regulation

In the absence of full repeal, lawmakers should specify that waivers will not permit states to directly or indirectly regulate the design and administration of self-funded ERISA plans.

At a minimum, waivers should prohibit states from imposing new definitions of “minimum essential coverage” or new reporting requirements.

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

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State Tax Assessments for Health Programs

Issue
A number of states have imposed new taxes on employers to fund Medicare expansion, exchange sustainability, vaccinations and other health programs.

The U.S. Sixth Circuit Court of Appeals ruled in Self-Insured Institute of America (SIAA) v. Snyder that a Michigan law – imposing a one percent tax on all claims paid by plan administrators for medical services and requiring quarterly returns to the state treasury –is not preempted by ERISA.

Solution
The Council believes that such mandates should indeed be preempted by ERISA and continues to pursue a legal strategy reinforcing this position at the appellate and Supreme Court level.

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

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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
Katy Spangler, senior vice president, health policy
Kathryn Wilber, senior counsel, health policy
202-289-6700

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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. The U.S. Department of Labor (DOL) has finalized regulations formally authorizing the establishment of such state programs and has also proposed similar regulations that would facilitate similar efforts by large cities and counties.

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.

SolutionThe Council has developed a set of principles for state-run retirement savings arrangements for private sector workers.  The Council may consider alternative solutions such as a voluntary federal standard that would 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. The Council’s letter argues that the DOL’s safe harbor runs contrary to the bedrock principle of ERISA: that employers who choose to offer a pension plan to employees should only be subject to a single statutory and regulatory regime under federal law.

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

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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