DOL Reaffirms ERISA Preemption of State Wage Withholding Laws
The U.S. Department of Labor (DOL) recently published an Information Letter that confirms the general preemption under ERISA of state civil laws that require employers to obtain written consent before withholding amounts from employees’ wages for contribution to a benefit plan subject to ERISA.
This information letter, dated December 4, 2018 responded to a question from an insurers’ association about whether ERISA would preempt a state law that prohibits an employer from implementing an auto-enrollment arrangement under which the employer enrolls an employee in the employer’s disability plan and contributes part of the employee’s wages as plan contributions (unless the employee affirmatively opts out of the arrangement).
With certain limited exceptions, ERISA generally preempts state laws that “relate to” ERISA-covered benefit plans. Consistent with prior DOL rulings, the Information Letter reaffirms the DOL’s view that ERISA would generally preempt a state civil law to the extent it served to: (i) “limit, prohibit, or regulate an employer’s adoption of automatic enrollment arrangements in connection with a disability benefit plan or other welfare benefit plan” covered by ERISA, or (ii) impose similar limitations on an employer’s ability to deduct wages from an eligible employee for contributions to such a plan."
Although DOL information letters do not have the force of law and should not be relied on as governing precedent, the December 2018 Information Letter nonetheless provides helpful reassurance that the DOL’s position with respect to general ERISA preemption of state wage withholding laws remains unchanged to the extent such laws relate to ERISA-covered employee benefit plans. However, it is worth noting that non-ERISA plans (such as dependent care flexible spending accounts, nor governmental or church plans not covered by ERISA) are not covered under these DOL information letters. An employer that uses a uniform enrollment system/process for all of its benefit plans could potentially be at risk with respect to its non-ERISA plans and programs if applicable state wage withholding laws are not followed.
Posted on February 18, 2019 by Gary B. Kushner, President and CEO