ERISA Regulations Often Preempt State Laws: Welfare Plans
In the world of employer compliance, it’s common to fall through Alice’s rabbit hole and end up completely confused about which laws apply to a specific situation. To start the year on the right foot, remember that federal laws governing ERISA-regulated employee welfare plans generally preempt state law.
In early December 2018, the DOL released an information letter outlining their interpretation* of ERISA § 514(a)—as applied to state civil laws requiring employers to secure written consent before withholding amounts from employees’ wages for contribution to an ERISA-covered plan. The letter cites two DOL Advisory Opinions to support the department’s argument and summarizes multiple Supreme Court cases. **
In a nutshell, however, the final paragraph of the letter states the DOL’s stance regarding the inquiry “ . . . a state law [like those in the opinions] would be preempted by §514(a) of ERISA to the extent the law is interpreted to limit, prohibit, or regulate an employer’s adoption of automatic enrollment arrangements in connection with a disability benefit plan or other welfare benefit plan covered under Title I of ERISA, or making related deductions from wages for contribution to such a plan.”
If you find yourself in Wonderland, first ask if the welfare plan in question is regulated by ERISA. Then, run the inquiry past competent counsel to verify whether federal or state laws govern. Often, for ERISA welfare plans, federal regulations win.
*Although promulgated by a government agency, the DOL’s letter is not binding precedent—persuasive, perhaps—but a court is not obliged to follow its guidance.