ERISA requires plans to provide participants with (1) Plan information including important information about plan features and funding, (2) Provides fiduciary responsibilities for those who manage and control plan assets, (3) Requires plans to establish a grievance and appeals process for participants to get benefits from their plans, and (4) Gives participants the right to sue for benefits and breaches of fiduciary duty.
In addition to offering certain protections for plan participants, ERISA also provides some employer protections. Under ERISA, plan participants have no right to a jury trial or punitive damages in litigation. Additionally, ERISA preempts state law – meaning that ERISA will supersede any and all State laws insofar as they relate to any employee benefit plan. This is beneficial for most employers because it relieves the possibility of multi-state litigation of its ERISA benefits.
Recently, the Department of Labor (DOL) issued an information letter that addresses the matter of ERISA preemption of state wage withholding laws. At issue was the question of whether ERISA would preempt a state law that prohibits an employer from implementing automatic enrollment arrangements where the employee is automatically enrolled in the employer’s disability plan and contributes part of the employee’s wages to the plan (unless the employee affirmatively opts out of the plan).
In the information letter, the DOL stated that ERISA will generally preempt state civil law to the extent that it serves to:
- Limit, prohibit, or regulate an employer’s adoption of automatic enrollment arrangements in connection with welfare benefit plans; OR
- Impose similar limitations on an employer’s ability to deduct wages from an eligible employee for contributions to such plan.
In confirming that ERISA preempts states wage withholding laws related to ERISA welfare benefit arrangements, this information letter serves as an important reminder of the expansiveness of the ERISA preemption rules. If an ERISA plan sponsor has concerns about a state law that prohibits or requires certain action(s), it should assess whether the state law is related to an ERISA plan where ERISA preemption would apply and potentially minimize compliance obligations.
For more information regarding the implementation of these requirements for your organization, contact your OneDigital consultant.