Employment Law (Management 445) Professor Charles H. Smith Employee Retirement Income Security Act (Chapter 9) Fall 2006

Introduction to ERISA The Employee Retirement Income Security Act (ERISA) was enacted by Congress in Response to pension fund mismanagement and abuse – retirees had pensions reduced or eliminated due to inadequate funding or depletion through mismanagement. Applies to employer-established employee benefit plans with focus on pension plans though no requirement that employer establish any pension plan.

Coverage of ERISA Employee pension benefit plan – plan, fund or program that provides retirement income to employees or that results in deferral of income until termination of employment and beyond. Employee welfare benefit plan – plan, fund or program the purpose of which is to provide employees-participants or their beneficiaries with certain benefits through purchase of insurance or otherwise; includes medical, surgical, hospital care, sickness, accident, disability, death benefits, unemployment, vacation, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services, financial assistance for employee housing, holidays, and severance benefits. Health plan considered employee welfare benefit plan if (1) intended beneficiaries, (2) class of beneficiaries and (3) procedures for receiving benefits; most health plans meet this broad definition.

Courts’ Interpretation of ERISA Review case studies on handout; one case to be announced on website later this week will be the subject of questions on next week’s quiz.

ERISA’s Preemption of State Law Claims As a federal statute, ERISA preempts any state law that purports to regulate employee welfare benefit plans; this is consistent with the Supremacy Clause of the U.S. Constitution (Article VI), which states: “This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.” Therefore, defendant will often raise preemption in order to obtain dismissal of an employee welfare benefit plan case based on state law.

ERISA’s Preemption of State Law Claims cont. Review case studies on handout; one case to be announced on website later this week will be the subject of questions on next week’s quiz. Insurance regulation exception – state laws regulating insurance are exempted from ERISA preemption; “exception to the exception” for employer self-funded insurance plans since no insurance contract involved.

Case Studies from Textbook Le v. Applied Biosystems (pages ) – claim under state disability statute not preempted by ERISA since conduct also illegal under federal law (ADA). Pegram v. Herdrich (pages ) – HMO is not a fiduciary under ERISA. Burnstein v. Retirement Account Plan (pages ) – resolution of conflict between summary plan description and the plan itself. Laborers’ Pension Fund v. A & C Environmental, Inc. (pages ) – requiring employer to contribute to pension fund per collective bargaining agreement. Harris Trust and Savings Bank v. Salomon Smith Barney Inc. (pages ) – ERISA permits lawsuit for equitable relief against nonfiduciary “party in interest.”

Case Problems from Textbook (pages ) 1 – necessary parties in ERISA lawsuit? 2 – does ERISA require this case to be heard in federal court? 3 – employee or independent contractor? (See IRS Publication 15A at for details and examples (pp. 6-8 only).) 4 – breach of CBA and pension plan? 5 – entitlement to be included in pension plan?