BIP Fall 2024

Voices

Promises protected: The story behind ERISA’s creation ERISA turned 50 on September 2nd. At 50, many of us reflect on the past and how we got here. By Jennifer Spiegel Berman

You know ERISA as a bag full of regulations and requirements, but do you understand how and why it passed and why its history is still relevant after all these years? As noted in “50 years of ERISA: From pension protection to modern benefit challenges” (p.28) in 1963, Studebaker Corporation closed its automobile manufactur ing plant in South Bend, Indiana, terminating its pension plan and leaving many employees with little or no pension benefits. In 1965,

regulations. ERISA preempts a patchwork of state laws and regula tions by covering self-funded health plans. This makes it easier to create multi-state health plans while providing uniform and consistent protections regardless of where workers are located. ERISA has spotlighted health plans in recent years. Fiduciary rules and responsibilities are a hot topic, with numerous plans being sued. Additionally, there is increas ing concern about cybersecurity. While the fiduciary standard is making headlines, other, more unexciting issues under ERISA need a watchful eye. For example, plan sponsors can quickly lose their preemption from state insurance law if they unintentionally create a multiple employer welfare arrange ment (MEWA) by combining em ployers that don’t meet certain IRS standards in a single plan. With out ERISA preemption in these circumstances, a self-funded plan would likely be unable to operate legally under various state laws. There are many other ERISA potholes to avoid. The increase in the number of self-funded plans (especially with some of those plans becoming available to smaller em ployers) amplifies the need for care ful compliance, making ERISA as relevant to protecting promises today as it was 50 years ago.

scandal underscored the need for stricter oversight and regulation of pension plans. Additionally, there were many instances of pension plans being underfunded or poorly managed, resulting in workers los ing their promised benefits. This contributed to a growing aware ness among workers, unions and policymakers about the potential for mismanagement, fraud, underfund ing and other risks to benefits. A uniform standard Against that background, Sen. Jacob Javits (R-NY) became an advocate for protecting employee pension plans. As the legislation took form, a goal was to create “uniform stan dards” for employee benefit plans. ERISA was born from these efforts. Notably, health plans have always been subject to ERISA’s Jennifer Spiegel Berman, JD, MBA, is the CEO of MZQ Consulting, LLC, one of the nation’s largest attorney-led benefits compliance firms.

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While still relevant to pension and other retirement plans, ERISA has spotlighted health plans in recent years.

the Wheeler v. Pullman Standard case involved a group of workers who sued the Pullman Standard Company, alleging that their pen sion plan had been improperly terminated and that they had been denied their rightful benefits. This drew attention to the lack of legal protections for workers in such situations. In the early 1970s, it was discovered that the Equity Funding Corporation had been involved in massive fraud, including creat ing fake insurance policies and mismanaging pension funds. The

20 bip magazine Fall 2024