At the height of the Great Depression, US President Franklin Roosevelt requested legislation to aid Americans in times of economic need. On August 14, 1935, Roosevelt signed the Social Security Act into law. The original Act provided benefits to workers upon retirement at age 65, and based the amount on tax contributions made during one's time as an active employee.
Per an analysis in the Monthly Labor Review, tax changes that developed [PDF] after the Social Security Act went into effect spurred the creation of private pension plans. In response, President John Kennedy established [PDF] the Committee on Corporate Pension Funds in March 1962 to research the effects of private pension plans on the financial stability of the economy. While the Committee investigated the topic, the Studebaker-Packard Corporation failed in 1964.
Intense competition between auto manufacturers led to Studebaker's demise. When the company folded, the inadequately funded pension plan did not have enough assets to finance the benefits owed to over 7,000 employees. According to an article in the Journal of Sociology and Social Welfare, Studebaker's bankruptcy highlighted the need for federal legislation to amend pension plan abuses and protect workers from corporate bankruptcy. Although the Committee presented their findings to President Lyndon Johnson in January 1965, Congress failed to pass any pension plan legislation.
A Congressional Research Service report published in May 2009 identified [PDF] the struggles in Congress during the 1970s to fix the pension system. Initially, the US House of Representatives and the US Senate pitched legislation within their respective labor committees. The Senate Finance Committee and the House Ways and Means Committee stepped in to assist legislative development. On September 2, 1974, President Gerald Ford signed the Employee Retirement Income Security Act (ERISA) into law.
Under ERISA, an employer is not required to set up pension plans. However, should it start one, it is held to certain specific minimum standards. Plan participants must be provided with information about the plan's features and funding. The Department of Labor, tasked with many of ERISA's enforcement responsibilities, sets standards for plan participation, including vesting, benefit accrual and funding.
Additional legislation passed since 1974 has added to ERISA's responsibilities. The Retirement Equity Act of 1984 [PDF] authorized spousal rights to benefits. The Pension Protection Act of 2006 [PDF] expanded advice for employees who participate in pension plans through 401(k)-type plans and individual retirement accounts.
In the four decades since the passage of ERISA, the US Supreme Court has granted certiorari to many cases dealing with the interpretation and application of the law. The Court's jurisprudence guides the District and Circuit courts in understanding how to handle ERISA claims.
In the 1983 case Shaw v. Delta Air Lines, the Court was asked to determine whether ERISA preempted New York state laws. The Court held that ERISA preempted the state Human Rights Law where it prohibited practices that were legal under federal law. Before the Court held that ERISA preempted the state law, it first determined whether the state law related to employee benefits within the meaning of § 514(a), also known as the Savings Clause. The statutory language was given the broadest possible meaning and the Court stated that a law related to the normal use of the phrase employee benefit plan if the law has a connection with or reference to such a plan.
The Court granted certiorari to a 1987 case, Metro Life Ins. Co. v. Taylor to determine whether ERISA's civil enforcement provision, § 502(a)(1)(B), preempted common law claims and displaced them to federal court. The Court answered in the affirmative and held that ERISA preempted common law causes of action filed in state court and that § 502(a)(1)(B) provided an exclusive federal cause of action for resolution of suits by beneficiaries to recover benefits from a covered plan.
Section 502(a)(1)(B) was also at issue in Firestone Tire & Rubber Co. v. Bruch, where the Court held that the de novo standard of review applies to a denial of benefits challenged under § 502(a)(1)(B). The standard applies unless the administrator or fiduciary of the benefit plan had discretionary authority to determine benefits eligibility or to construe the terms of the plan.
The Court continues to handle litigation pertaining to § 502 of ERISA. The Court held in LaRue v. DeWolff, Boberg & Associates in 2008 that ERISA allows an employee to sue for losses incurred when the administrators of his retirement plan ignore his instructions on how to invest his retirement money. The Court held in the 2010 case, Hardt v. Reliance Standard Life Insurance Co., that unsuccessful fee claimants that filed lawsuits under ERISA can still be eligible for attorney's fees under § 502.
In Conkright v. Frommert, the Court in 2010 granted certiorari to determine whether an administrator that made a "single honest mistake" should lose deference for subsequent interpretations of the plan. In doing so, it revisited part of the holding from Bruch that granted deference to ERISA plan administrators in interpreting plans. The Court held that District Courts must defer to an administrator's reasonable interpretation of the terms of the plan, even if a court invalidated a prior interpretation of the plan by that administrator.
The Employee Retirement Income Security Act (ERISA) has developed since it first passed in 1974. Some of the most pressing and evolving issues today pertain to marriage statuses under ERISA, the impact of the Affordable Care Act, if any, on ERISA and the several ongoing litigations pertaining to the intricacies of when it applies and relief is granted and when it does not.
Supreme Court and ERISA
As with most Congressional acts, the application of ERISA has been formed and crafted through multiple US Supreme Court cases. A sampling of recent rulings reveal the complicated nature of the law, as well as the developing way it is applied. In the upcoming term, the Court will hear arguments pertaining to the deadline for filing a complaint to challenge a denial of disability under ERISA. In April 2013, the Court ruled that ERISA does not authorize the overturn of the terms of a contract in a health benefit plan through the application of equitable principles.
In May 2011, the Court ruled on what "showing" is required to entitle participants in the pension plan to recover benefits where there has been an alleged inconsistency between the explanation of benefits and the terms of the plan. The Court found that the district court was not authorized to grant relief under ERISA's recovery-of-benefits-due provision but that a different provision authorized similar relief, remanding the case to the district court for reconsideration.
In May 2010, the Court found that the wording of ERISA did not require an individual to be a "prevailing party" to be eligible for attorney's fees. That same month, the Court ruled that a district court has an obligation to defer to an ERISA plan administrator's reasonable interpretation outside the context of an administrative claim for benefits.
Marriage and ERISA
The legalization of same-sex marriage in various jurisdictions around the country has had little impact on ERISA due to the Defense of Marriage Act [PDF] (DOMA). For all federal laws and regulations, DOMA defined the term "marriage" as being between a man and a woman and "spouse" as being limited to a person of the opposite sex. In June 2013, the Supreme Court ruled DOMA unconstitutional, thus reinstating the individual state definitions of marriage for federal law purposes.
On September 19, the US Department of Labor issued guidance that the terms "spouse" and "marriage" should now be interpreted as including all legally married same-sex relationships. This means that same-sex spouses should be offered retirement benefits under ERISA, even if they are married in a state where same-sex marriage is illegal, so long as the spouses were legally married in another state. There are still intricacies of what this means in regards to states where same-sex marriage is still illegal, given the untested nature of this in the courts.
The federal government has also issued [PDF] a statement that all same sex spouses of federal employees are eligible for retirement benefits, although this falls outside of ERISA since it only applies to the private sector.
The Patient Protection Affordable Care Act and ERISA
The Affordable Care Act created § 715 of ERISA. It reads, in part:
(a) Except as provided in subsection (b):
(1) the provisions of part A of title XXVII of the Public Health Service Act (as amended by the
Patient Protection and Affordable Care Act) shall apply to group health plans, and health insurance issuers providing health insurance coverage in connection with group health plans, as if included in this subpart; and
(2) to the extent that any provision of this part conflicts with a provision of such part A with respect to group health plans, or health insurance issuers providing health insurance coverage in connection with group health plans, the provisions of such part A shall apply.
The impact this will have on ERISA is not totally known due to it not being fully enacted yet, although its goal is to ensure and protect continued healthcare coverage to individuals who are promised some sort of continued welfare benefit post-retirement.
09/18/2013: US to recognized all same-sex marriages for employee benefit purposes
04/16/2013: Supreme Court vacated appeals court decision in ERISA case
05/24/2010: Supreme Court upheld fee shifting in ERISA case
04/21/2010: Supreme Court ruled district court must defer to retirement plan administrator
09/30/2008: Ninth Circuit upheld San Francisco health care ordinance against ERISA challenge
02/19/2008: Supreme Court ruled in two ERISA retirement plan cases
08/17/2006: Bush signed pension reform bill into law
08/07/2006: Seventh Circuit ruled IBM cash-balance pension plan not ERISA age discrimination