Opinion ID: 3050856
Heading Depth: 4
Heading Rank: 1

Heading: “Connection with” a Plan

Text: “[T]o determine whether a state law has the forbidden connection” with ERISA plans, we “look both to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive, as well as to the nature of the effect of the state law on ERISA plans.” Dillingham, 519 U.S. at 325 (citations and internal quotation marks omitted). To do so, we employ a “holistic analysis guided by congressional intent.” Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 981 n.15 (9th Cir. 2001); see, e.g., Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001). “The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans.” Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004). The purpose of ERISA’s preemption provision is to “ensure[ ] that the administrative practices of a benefit plan will be governed by only a single set of regulations.” Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11 (1987). In Ingersoll-Rand Co. v. McClendon, the Court explained that Section 514(a) was intended to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives -17- among States or between States and the Federal Government. Otherwise, the inefficiencies created could work to the detriment of plan beneficiaries. 498 U.S. 133, 142 (1990). In furtherance of ERISA’s goal of ensuring that “plans and plan sponsors [are] subject to a uniform body of benefits laws,” the Court in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), struck down a Washington State law that directed a choice of beneficiary that conflicted with the choice provided in an ERISA plan. The Court held that a state or local law has an impermissible “connection with” ERISA plans where it “binds ERISA plan administrators to a particular choice of rules for determining beneficiary status[,] . . . rather than [allowing administrators to pay the benefits] to those identified in the plan documents.” Id. at 147. Similarly, in Shaw v. Delta Air Lines, 463 U.S. 85, 97-100 (1983), the Court held that state laws “which prohibit[ ] employers from structuring their employee benefit plans” in a particular manner or “which require[ ] employers to pay employees specific benefits” are preempted. Consistent with these later-decided cases, in Standard Oil Co. v. Agsalud, 633 F.2d 760 (9th Cir. 1980), aff’d, 454 U.S. 801 (1981), we struck down a Hawaii statute that “require[d] employers in that state to provide their employees with a comprehensive prepaid health care plan.” Id. at 763. As the district court noted, the -18- statute required that plan benefits include “a combination of features,” and specifically “require[d] that the plans cover diagnosis and treatment of alcohol and drug abuse.” Standard Oil Co. v. Agsalud, 442 F. Supp. 695, 696, 704 (N.D. Cal. 1977). The statute also imposed “certain reporting requirements which differ[ed] from those of ERISA.” Id. at 696. In affirming the district court’s opinion holding the Hawaii statute preempted under ERISA, we emphasized that the statute “directly and expressly regulate[d] employers and the type of benefits they provide employees,” and that it therefore “related to” ERISA plans under § 514(a). Agsalud, 633 F.2d at 766 (emphasis added). That is, the Hawaii statute was preempted because it required employers to have health plans, and it dictated the specific benefits employers must provide through those plans. Id. The statute thereby impeded ERISA’s goal of ensuring that “plans and plan sponsors would be subject to a uniform body of benefits law.” Fort Halifax Packing Co., 498 U.S. at 142. The Ordinance in this case stands in stark contrast to the laws struck down in Egelhoff, Shaw and Agsalud. The Ordinance does not require any employer to adopt an ERISA plan or other health plan. Nor does it require any employer to provide specific benefits through an existing ERISA or other health plan. Any employer covered by the Ordinance may fully discharge its expenditure obligations -19- by making the required level of employee health care expenditures, whether those expenditures are made in whole or in part to an ERISA plan, or in whole or in part to the City. The Ordinance thus preserves ERISA’s “uniform regulatory regime.” See Aetna Health Inc., 542 U.S. at 208. The Ordinance also has no effect on “the administrative practices of a benefit plan,” Fort Halifax Packing Co., 482 U.S. at 11, unless an employer voluntarily elects to change those practices. A covered employer may choose to adopt or to change an ERISA plan in lieu of paying the required health care expenditures to the City. An employer may be influenced by the Ordinance to do so because, when faced with an unavoidable obligation to make the required health care expenditure, it may prefer to make that expenditure to an ERISA plan. As New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645 (1995), makes clear, such influence is entirely permissible. In Travelers, a New York statute required hospitals to collect surcharges from patients covered by commercial insurance companies, including those administering ERISA plans, but not from patients covered by Blue Cross/Blue Shield plans. The difference in treatment was justified on the ground that “the Blues pay the hospitals promptly and efficiently and, more importantly, provide coverage for many subscribers whom the commercial insurers would reject as -20- unacceptable risks.” Id. at 658. The Court recognized that the surcharge might have an influence on “choices made by insurance buyers, including ERISA plans.” Id. at 659. But such an influence was not fatal to the New York statute: An indirect economic influence . . . does not bind plan administrators to any particular choice and thus function as a regulation of an ERISA plan itself[.] . . . Nor does the indirect influence of the surcharges preclude uniform administrative practice[.] Id. at 659-60. In this case, the influence exerted by the Ordinance is even more indirect than the influence in Travelers. In Travelers, the required surcharge on benefits provided under ERISA plans administered by commercial insurers inescapably changed the cost structure for those plans’ health care benefits and thereby exerted economic pressure on the manner in which the plans would be administered. Here, by contrast, the Ordinance does not regulate benefits or charges for benefits provided by ERISA plans. Its only influence is on the employer who, because of the Ordinance, may choose to make its required health care expenditures to an ERISA plan rather than to the City. Further, the Ordinance does not “bind[ ] ERISA plan administrators to a particular choice of rules” for determining plan eligibility or entitlement to particular benefits. See Egelhoff, 532 U.S. at 147. Employers may “structur[e] their -21- employee benefit plans” in a variety of ways and need not “pay employees specific benefits.” See Shaw, 463 U.S. at 97. The Ordinance would “leave plan administrators right where they would be in any case.” Travelers Ins. Co., 514 U.S. at 662. See also WSB Elec., Inc. v. Curry, 88 F.3d 788, 793 (9th Cir. 1996) (“The scheme does not force employers to provide any particular employee benefits or plans, to alter their existing plans, or to even provide ERISA plans or employee benefits at all.”); Keystone Chapter, Associated Builders & Contractors, Inc. v. Foley, 37 F.3d 945, 960 (3d Cir. 1994) (“Where a legal requirement may be easily satisfied through means unconnected to ERISA plans, and only relates to ERISA plans at the election of an employer, it affects employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law ‘relates to’ the plan.” (some internal quotation marks omitted)). Finally, the Ordinance does not impose on plan administrators any “administrative [or] financial burden of complying with conflicting directives” relating to benefits law. Ingersoll-Rand Co., 498 U.S. at 142. The Ordinance does impose an administrative burden on covered employers, for they must keep track of their obligations to make payments on behalf of covered employees and must maintain records to show that they have complied with the Ordinance. But these burdens exist whether or not a covered employer has an ERISA plan. Thus, they -22- are burdens on the employer rather than on an ERISA plan. See WSB Elec., Inc., 88 F.3d at 795 (rejecting the argument that a law “is preempted because it imposes additional administrative burdens regarding benefits contributions on the employer,” where it did “not impose any additional burden on ERISA plans or require the employer to take any action with regard to those plans” (emphasis in original)).