BIP Fall 2024

hen the Studebaker Corporation closed its South Bend, Indiana, plant in 1963,

thousands of employees didn’t just lose their jobs — they lost their pensions. Employees had been kept in the dark about the company’s finances, unaware that the pension fund was severely underfunded. Public outcry spurred Congress to act, and a decade later, the Employee Retirement Income Security Act of 1974 (ERISA) was signed into law. Now celebrating its 50th anniversary, ERISA remains the foundation of employee benefits regulation. “It was the first time we saw major employee benefit protections,” says David Mordo, principal at D Mordo Consulting, LLC. “It was enacted to protect employees and their pensions and retire ment benefits, and it morphed into health benefits. It’s come a long way in 50 years.”

Prior to the enactment of ERISA, employee benefits regulations varied from state to state with minimal federal oversight. Pension plans were often underfunded, and employees had no information about the health of their retirement plans. ERISA brought accountability and transparency to the em ployee benefits market, requiring plan fiduciaries to put the interests of employees and plan beneficiaries first. As a foundation, the law required minimum funding levels to ensure stability and consistent employee notification about plan status. ERISA evolves Over the years, ERISA has evolved into a massive piece of legislation managed by the Department of Labor, the Internal Revenue Service, and in some cases, the Health and Human Services and the Treasury Departments. With the law’s longstanding presence and expansion of the scope have come questions on how to interpret some of ERISA’s fundamental tenets. The biggest one? Defining fiduciary duty. “How employer plan sponsors meet their fiduciary duties is being litigated as we speak,” says Jennifer Berman, chief executive officer of MZQ Consulting and senior vice president, compliance at KELLY Benefit Strate gies. For health and welfare plan sponsors in particular, “it’s a topic of a lot of conversations,” she says. Another factor under the microscope is ERISA’s preemption of state law. “ERISA obvi ously preempts state law in many cases, but exactly how — and to what extent — has always been a question,” Berman says. “We’re seeing more and more challenges to preemption as states try to get into the regulation of self-funded health plans. Many more questions than answers are beginning to evolve in that space.”

KEY POINTS

▶ ERISA’S IMPACT AND EVOLUTION: The Employee Retirement Income Security Act of 1974 (ERISA) protects employees’ pensions and retirement benefits, bringing accountability and transparency to employee benefits. Over the past 50 years, it has expanded to include health benefits and remains the foundation of employee benefits regulation. ▶ ONGOING CHALLENGES: ERISA’s evolution has led to ongoing debates about key aspects like fiduciary duties and the preemption of state laws. Supreme Court decisions have added complexity by limiting federal agencies’ power to interpret regulations, leaving the courts as the final authority. ▶ THE ROLE OF AGENTS: Agents must navigate fiduciary duties and compliance, avoiding conflicts of interest and staying informed about regulations. As ERISA continues to evolve, the importance of transparency, fee disclosure and understanding fiduciary responsibilities will only grow.

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30 bip magazine Fall 2024