Katie Mahoney Katie Mahoney
Former Vice President, Health Policy, U.S. Chamber of Commerce
Chantel Sheaks Chantel Sheaks
Vice President, Retirement Policy, U.S. Chamber of Commerce


August 31, 2023


The ability of multistate employers to provide uniform health and retirement benefit plans to all employees regardless of where the employees lives is rooted in a nearly 50-year-old law titled the Employee Retirement Income Security Act (ERISA). Efforts to erode ERISA’s preemption will place all employer-provided benefits in jeopardy.

Fill me in: ERISA was enacted in 1974. Before that time, there was not a lot federal regulation of employer-provided benefits, other than through the federal tax code. As such, in the 1960’s states started to fill in this space. Both employers and unions recognized that to ensure the plans operated efficiently, federal, not state law, needed to regulate these plans. That’s why Congress included a broad preemption provision in ERISA to allow for the uniform and consistent regulation of these plans across state lines. Without preemption, states and localities could force employers to comply with a patchwork of recordkeeping, reporting or other state or local mandates that would raise the cost of employee benefits plans, make administration next to impossible, frustrate collective bargaining and erode equitable benefit offerings to employees regardless of location. 

Although ERISA’s preemption provision is broad, not all state laws are preempted. Congress recognized that some laws, such as state insurance laws regulating actual insurers, fall within the traditional domain of state regulators. However, Congress did carve out self-funded or self-insured ERISA health and welfare plans from the exemption. This means when a plan sponsor directly pays for benefits rather than contracting with an insurer to be on the hook for paying benefits, states cannot deem these plans to be insurance, and therefore cannot regulate them. 

Unfortunately, for years, states have attempted to enact laws that would affect self-insured employer health and welfare plans. When state legislatures have succeeded, litigation has followed to challenge and dispute the ability state laws to pierce the ERISA preemption veil and apply to self-insured employer plans. In each legal challenge, the fact pattern of the particular state law is parsed to distinguish and delineate why circumstances should dictate whether ERISA preempts state law.   

What’s at stake: In response to these ongoing state-by-state legislative efforts and ensuing multitude of whack-a -mole legal challenges, some in Congress are attempting to enact federal legislation that expressly permits the application of state and local laws to self-insured health and welfare benefit plans. Permitting certain state laws to pierce the ERISA pre-emption veil, regardless of how “innocuous” it may sound, will be the first hole in opening the floodgates to erode ERISA preemption, regardless of how “narrowly” crafted a preemption carve out may start.  

Any legislative “clarification” that expressly permits the application of certain state laws to self-insured health and welfare plans will increase costs for employers and employees, reduce coverage for American workers and their families, and erode benefit choice. 

To be clear, while the issue is currently framed to focus on health benefits, other types of benefit offerings will be jeopardized if we allow states to regulate employee benefit plans. ERISA plans include retirement, severance, vision, dental, disability and life insurance, and certain apprentice plans, all of which also must have uniform administration and regulation. For unionized workforces, employee benefits are a mandatory subject of bargaining, and many collectively bargained plans cover employees across state lines. Erosion of ERISA preemption also would severely impact any types of negotiations. 

Protect ERISA Pre-emption. Weakening ERISA preemption by expressly allowing certain state laws to apply to self-insured plans will drive up costs, eviscerate the ability to offer uniform benefits to all workers regardless of where they live and likely impact other benefits workers receive from their employer. And, no matter how narrow the carve out may be, the carve out itself will inevitably be subject to even more litigation. 

Bottom line: Eroding ERISA preemption protections sets a dangerous precedent for all employer-provided benefits and will permit the application of a new patchwork of state laws, which is exactly what Congress meant to avoid nearly 50 years ago when, after nearly 10 years of investigations and negotiations, it included ERISA’s broad preemption provision in the final bill. The U.S. Chamber and its business community allies continue to oppose any efforts to pierce the ERISA preemption protection veil.   

About the authors

Katie Mahoney

Katie Mahoney

Katie W. Mahoney is the former vice president of health policy at the U.S. Chamber of Commerce.

Chantel Sheaks

Chantel Sheaks

Chantel Sheaks develops, promotes, and publicizes the Chamber’s policy on retirement plans, nonqualified deferred compensation, and Social Security.

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