The United States Department of Labor (“DOL”) has issued an Information Letter confirming that state laws requiring employers to obtain written consent before withholding amounts from employees’ wages for benefit plan contributions are preempted by ERISA.
Background. The DOL has previously issued guidance (i.e., Advisory Opinion 2008-02A) that ERISA preempted state laws that attempt to govern automatic enrollment in ERISA-covered plans, including disability and other welfare benefit plans. Specifically, DOL confirmed that ERISA preemption applies to a state law to the extent that it “limits, prohibits, or regulates” an employer’s automatic enrollment feature.
Information Letter. The Information Letter responds to a question received from an insurance association about whether ERISA would preempt a state law requiring employers to obtain written consent before withholding amounts from employees’ wages. Specifically, the insurance association asked whether ERISA would preempt a state law prohibiting an employer from implementing arrangements whereby it automatically enrolls employees into its disability plan, and contributes a portion of the employee’s wages as plan contributions, unless the employee affirmatively elects not to participate in such arrangement.
In the Information Letter, the DOL explains that ERISA preempts state laws insofar as they relate to any ERISA-covered employee benefit plan. In particular, the DOL notes that the Supreme Court has identified at least three instances in which a state law can be said to have a prohibited connection with ERISA-covered employee benefit plans: when it (1) mandates employee benefit structures or their administration; (2) binds employers or plan administrators to particular choices or precludes uniform administrative practice; and (3) provides an alternative enforcement mechanism to ERISA.
The DOL further observed that it has issued prior Advisory Opinions confirming that state laws prohibiting automatic enrollment arrangements are preempted (by ERISA) because they implicate an area of core ERISA concern by directly interfering with plan requirements regarding eligibility for participation and benefits, as well as the plan’s funding mechanism. On this basis, the Information Letter confirms DOL’s view that state laws regarding automatic enrollment arrangements are preempted by ERISA to the extent the laws are interpreted to limit, prohibit or regulate an employer’s adoption of automatic enrollment arrangements in connection with any welfare benefit plan covered under ERISA.
The Information Letter is available at https://www.dol.gov/sites/default/files/ebsa/employers-and-advisers/guidance/information-letters/12-4-2018.pdf