The Employee Retirement Income Security Act of 1974, as amended (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry. The primary purpose of ERISA is to protect the individuals who participate in these plans.
From the U.S. Circuit Courts to the Supreme Court of the United States (SCOTUS), there was no shortage of cases involving employee health plans in 2021. For example, the Supreme Court rejected a challenge to the Affordable Care Act. At the same time, the Ninth Circuit backed California’s auto-IRA program, giving states a greater ability to boost employees’ retirement savings. Here is a brief look at two noteworthy benefits rulings from 2021. We will address another three rulings in our next ERISA post.
SCOTUS Upholds a Challenge to the Affordable Care Act
*California et al. v. Texas et al., case number 19-840, Texas et al. v. California et al., case number 19-1019, in the Supreme Court of the United States.
The Supreme Court ruled in June 2021 to uphold the Affordable Care Act. This decision was one of the most significant rulings affecting employee benefits in 2021, especially when considering what was at stake.
The court’s ruling that a group of GOP-led states lacked standing to challenge the ACA was crucial, because a successful challenge would have overturned the ACA, sending health care plans nationwide into turmoil.
The Republican states claimed that Congressional elimination of the penalty for failing to comply with the law’s mandate to buy insurance, made this provision invalid. Because of the provision’s importance, if invalidated the entire law would also be invalid, and the only recourse would be for SCOTUS to strike down the ACA entirely.
The Supreme Court’s choice to rule on standing and uphold the law eliminated some uncertainty surrounding the ACA ever since the mandate was eliminated in 2017 as part of the Trump Administration’s effort to subvert the law.
On appeal, the Fifth Circuit had agreed with Republicans that removing a monetary penalty for failing to comply with the law’s mandate to buy insurance had rendered it invalid. The same court then requested a lower court in Texas to explain better its ruling that stated that the entire ACA was null and void. However, SCOTUS vacated that request with this key benefit ruling from 2021.
Ninth Circuit Rejects Challenge to CalSavers
*James Smith v. Board of Directors of Triad Manufacturing Inc. et al., case number 20-2708, in the U.S. Court of Appeals for the Seventh Circuit.
The Ninth Circuit ruled in May 2021 that California’s state-run retirement program, known as CalSavers, wasn’t preempted by ERISA, giving similar auto-IRA programs in other states a substantial victory. States having similar programs include Colorado, Connecticut, Illinois, Maryland, New Jersey, and Oregon.
“That certainly creates some comfort for other states that are interested in doing the same thing,” said William Alvarado Rivera, senior vice president for litigation at the AARP Foundation.
Rivera said the ruling was important because “we know that the current savings for American workers are low, that many employers don’t offer the opportunity for employees to be able to save for their retirement.”
The appeals panel upheld a March 2020 ruling in which U.S. District Judge Morrison C. England Jr. found that the California Secure Choice Retirement Savings Program was related neither to an ERISA plan nor an employee benefit plan. According to the judge, the state program was not preempted by ERISA.
California initiated CalSavers, a state-mandated auto-enrollment retirement savings program, in 2016. The program automatically deposits part of worker’s earnings into individual retirement accounts (IRAs).
The Howard Jarvis Taxpayers Association, the tax-cut advocacy group that sued to invalidate the program, has petitioned the U.S. Supreme Court to hear their case. The case is Howard Jarvis Taxpayers Association v. California Secure Choice Retirement Savings Program, case number 20-15591, in the United States Supreme Court.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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