ERISA 50 Years and Counting
In 1974, the United States was planning the celebration of its bicentennial, Richard Nixon resigned as president following the Watergate scandal, women gained the right to have their own credit cards with the passage of the Equal Credit Opportunity Act, and the Oakland Athletics won their third consecutive World Series. It was also on Labor Day of that year that Congress passed a landmark piece of legislation: the Employee Retirement Income Security Act, or ERISA.
At that time, defined benefit plans were the predominant retirement savings vehicle for working Americans, and 401(k) plans didn’t yet exist. The passage of ERISA followed years of public outcry over the potential inability of private pension plans to fulfill their promises—as proved to be the case when the Studebaker Corporation went belly up in the mid-1960s—and that people could lose their pension benefits. (If, instead of ERISA, a Studebaker calls to mind Kermit and Fozzie Bear road-tripping to Hollywood, you’re not alone.) Over time, additional legislation, including COBRA, HIPAA, PPA, and the SECURE and SECURE 2.0 Acts, would evolve ERISA into the legal framework we know today.
What Makes ERISA Meaningful
The 50th anniversary of ERISA will be marked this fall with a series of events celebrating its achievements. On its golden anniversary, to gain perspective on ERISA’s impact, I asked several Segal colleagues to share their thoughts. Their observations include common themes about the safety and security of benefits that employees can count on.
- “I graduated law school ten years after ERISA was passed, so I grew up along with ERISA and the opportunity to see the evolution of the law. A key part of ERISA is the requirement that fiduciaries act solely in the interests of the participants and beneficiaries of the plan. That has become a guiding principle for fiduciaries and practitioners and is unique from other laws where a company may be acting in the interests of a shareholder or class of employees rather than the participants and beneficiaries in the health or pension plan. The fiduciary aspect of having an overriding loyalty to the participants and beneficiaries in the plan is something I’ve seen in action over and over again. In everything, from selecting a service provider to hiring staff, fiduciaries have to keep that overriding principle in mind.”
— Kathy Bakich, Segal Senior Compliance Consultant
- “The 50th anniversary of ERISA signifies that workers have been assured that the benefits they are offered by their employers are meaningful, safe, and designed with the best interest of employees in mind. ERISA requires employers to offer employees certain protections in their benefits, which include protection of their privacy (through HIPAA), protection of their coverage even after termination of employment (through COBRA), and protection to know that the pension that they were promised will actually be there when they retire. All of these are due to ERISA, along with offering clarity regarding how their plans work, what’s covered versus not, and what rights an employee has when they have questions about their benefits.”
— Chris Calvert, Segal National Corporate Health Leader
- “Retirement plans are successful when they provide meaningful retirement income, with stable contributions and secure benefits, while understood and appreciated by key stakeholders. ERISA, while certainly imperfect, has been critical to ensuring benefits are secure and individuals can trust the promise associated with their pension benefits.”
— Jonathan Price, Segal Retirement Practice Leader
- “On the occasion of ERISA’s 50th anniversary, it is important to note how this law still lives up to its name. ERISA protects the security of retirement income from employer-sponsored plans by providing uniform rules for all plans to follow, regardless of where they operate. ERISA ensures fairness for employees as to who is eligible to benefit, requires a reasonable period of service for vesting in plan benefits, protects spouses who rely on the benefits of participants, and prohibits reducing retirement benefit amounts once earned. ERISA also requires benefits to be appropriately funded during the employee’s working life and holds plan fiduciaries accountable for acting in the best interest of employees, including clearly communicating benefit terms to plan participants. Employees can plan for retirement, because ERISA protections mean they can rely on the benefits they were promised by employers.”
— Melanie Walker, Segal National Compliance Practice Leader
- “Unlike workers in many other countries, most American workers in the private sector rely on employer-sponsored health insurance and retirement savings plans. ERISA created the framework for protecting these crucial benefits, thereby improving the day-to-day lives of so many workers and their family members. The 50th anniversary of ERISA is an opportunity to reflect on the many changes to the employee benefits landscape since 1974, for example, the dominance of defined contribution plans and the increasing complexity of health plan designs. It is also a chance to think about what has remained constant—the standards requiring ERISA fiduciaries to act with prudence and loyalty, solely in the interest of a plan’s participants and beneficiaries.”
— Julia Zuckerman, Segal Senior Compliance Consultant
The Future of ERISA
Can we expect ERISA to further evolve in the years to come? My Segal colleagues say “yes!” for a variety of reasons.
- “Like every aspect of our lives, benefits are becoming more and more digital. In the future, ERISA may be offering protections regarding how virtual benefits are provided and what safeguards the providers in this space are required to follow.”
— Chris Calvert, Segal National Corporate Health Leader
- “ERISA must evolve—as it has over the past 50 years—to address the current and future challenges of working Americans to ensure the right balance between the key metrics of stability and security. Particularly as the 401(k) generation retires, ERISA will continue to evolve to address the need for a system that enables meaningful retirement income.”
— Jonathan Price, Segal Retirement Practice Leader
- “The Supreme Court’s recent ruling in the Loper Bright case, eliminating the so-called Chevron deference, could meaningfully affect how courts treat agency regulations under ERISA. And there are many of those, both for retirement as well as health plans. While this sounds technical—and, indeed, involves technical legal issues—it has a lot of practical importance for how benefit plans operate. Under Chevron, courts had to defer to a federal agency’s interpretation of an ambiguous federal statute, so long as the interpretation was not “arbitrary and capricious.” Now, without this tipping of the scale in favor of an agency’s interpretation, the fate of several regulations affecting ERISA plans is unclear. There is already litigation challenging the Department of Labor’s regulation governing environmental, social, and governance (ESG) investing as well as its updated fiduciary rule. And there is little doubt that the DOL’s much-anticipated mental health parity regulations will be subject to litigation. Given all of this regulatory murkiness, ERISA plans may see agencies focus more on informal guidance (like FAQs) and enforcement efforts.”
— Julia Zuckerman, Segal Senior Compliance Consultant
The Importance of ERISA Preemption
- “As we see more cases on issues such as preemption of state pharmacy benefit laws, it’s important to recognize that the ERISA preemption provisions that were implemented 20 or 30 years ago are still valid and still protect beneficiaries. ERISA preemption allows health plans to adopt a nationwide plan of benefits for all its participants in an efficient and effective administrative plan, as opposed to having patchwork plans and different benefits for employees depending on where they live. State laws that might have affected plans operating nationwide, such as outlawing mail-order benefits, have been held to be preempted by ERISA, because that would interfere with the plan’s uniform benefit administration.
"As a health plan lawyer, it’s been interesting to see the evolution of ERISA as it became a vehicle for implementation of federal health care mandates, such as the Women’s Health and Cancer Rights Act, the Mental Health Parity and Addiction Equity Act, and the Care Act. Plan sponsors implementing these laws continue to need robust regulatory guidance. In some cases, regulatory enforcement has appeared to take a primary position over issuing guidance, but hopefully this trend is short-lived.
“While ERISA has not been flawless, it has helped protect the interests of workers in their health and pension benefits. Future efforts to change or amend ERISA should keep those goals in mind.”
— Kathy Bakich, Segal Senior Compliance Consultant
Learn More About ERISA—Then and Now
Over the years, ERISA has been amended many different times to adapt to the needs of an evolving workforce. As the way we work continues to change and shift—from the impact of technology to new types of working arrangements, i.e., gig work—future challenges will continue to put pressure on lawmakers to keep ERISA relevant for future generations of American workers.
Learn more about ERISA and its impact.
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Megan Yost, SVP Engagement Strategist, is a recognized thought leader in benefits communications, particularly in the areas of retirement, financial wellness, and employee engagement.
