South Carolina law allows for punitive damages in many cases. However, ERISA is a federal law that does not allow punitive damages. The conflict between ERISA and South Carolina law is settled by a legal concept known as “preemption.” ERISA preempts (overrides) state law as a federal law unless the applicable state law regulates insurance.
South Carolina’s statute allowing punitive damages does not seek to regulate the insurance industry. Thus, ERISA will preempt the South Carolina rule, and a court will not grant punitive damages in an ERISA case.
Instead, ERISA authorizes courts to grant “appropriate equitable relief.” An ERISA lawsuit may result in the participant receiving the total amount of the plan’s benefit. The court may also order the plan administrator to return mishandled plan funds.