Regulation of Employee Welfare Benefit Plans: The Scope of ERISA\u27s Preemption and the State Power to Regulate Insurance

In 1974 Congress enacted the Employee Retirement Income Security Act, which was hailed as landmark social legislation in the area of pension and welfare plan reform. It has been characterized as the greatest development in the life of the American worker since social security. ERISA was enacted to remedy many of the defects and problems associated with employee pension and welfare benefit plans. A primary objective was to strengthen the private employee benefit plan system to provide for the retirement and financial security of employees and their families and, no less importantly, to encourage the growth of this system. Many employees were losing anticipated pension and welfare benefits because of the lack of vesting provisions, the financial instability of benefit plans, imprudent investment by plan trustees, theft of plan assets, and plan termination without adequate funds to cover accrued liabilities. ERISA is a lengthy and complex regulatory framework setting out standards for welfare and pension plan reporting and disclosure, fiduciary responsibility, administration and enforcement. … ERISA does not provide for the substantive regulation of benefit requirements for welfare plans. The result is a statutory vacuum for welfare plans. Some states have attempted to fill this vacuum by enacting legislation requiring that certain types of benefits be included in group health insurance which is purchased by employee welfare benefit plans, or by indirectly regulating welfare benefit plans. Many states view this legislation as socially progressive because it is designed to provide increased benefits and protect against illusory benefits. This policy, however, can produce the opposite of the expected result in some cases and is counter-productive to the goal of national uniformity sought by Congress. To eliminate conflict with state and local regulation, ERISA grants control to the federal government over the establishment, conduct, supervision, and regulation of employee benefit plans