ERISA Preemption

Here is a brief summary of ERISA preemption of state anti-subrogation laws.

Many state-level statutory insurance schemes exist in the shadow of the federal Employee Retirement Income Security Act of 1974 (ERISA). These state statutes, including the New Jersey collateral source statute, can be preempted by this federal law. 29 U.S.C. §1132(a)(3) provides that “appropriate equitable relief” may be given to enforce an ERISA plan’s language. Hence, the plan’s language is given force of ERISA law and will preempt state law to the same extent that ERISA itself preempts state law.

ERISA’s statutory scheme must be read carefully. The United States Supreme court in Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739-740 (1985) observed:

In order to understand how ERISA preemption works, we first look to 29 U.S.C. 1144(a), which is ERISA’s “preemption clause.” It reads in part:

Up to this point, ERISA would preempt any state law that would effect an ERSIA plan's subrogation clause. The effect of 1144(a) is almost entirely eliminated by 1144(b)(2)(a), which is commonly referred to as the “savings clause.” The pertinent provision of this clause reads:

According to this clause, any state law which regulates the insurance industry is not preempted by ERISA. Thus far, the preemption clause of ERISA 1144(a) opened the door widely for ERISA subrogation, while the savings clause of 1144(b)(2)(A) slammed that door shut. A final relevant clause, the “deemer clause,” §1144(b)(2)(B) provides some daylight for subrogation in self-funded ERISA plans:

This clause basically means that self-funded ERISA plans are not subject to state laws regulating insurance. F.C. Corp. v. Holiday, 498 U.S. 52, 64-65 (1990).

The bottom line on preemption: ERISA subrogation rights will preempt any state law that prevents subrogation, unless it is a law regulating insurance. A law regulating insurance will not be preempted for full-funded ERISA plans (AKA an "insured plan"), but will be preempted for self-funded ERISA plans.

This document is provided as a reference guide only and is provided subject to this disclaimer.

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