ERISA at 50: A New Era of Fiduciary Accountability for Health and Welfare Plans

OCTOBER 1, 2024

As the Employee Retirement Income Security Act of 1974 (ERISA) turns 50 this year, recent litigation and a Supreme Court ruling provide a glimpse into what the future of ERISA may hold for health and welfare plans.

ERISA was originally thought of as legislation that governed retirement and pension plans for private-sector employers in the U.S. However, the law’s more recent history highlights an increased focus on its application to health and welfare plans. This includes various amendments that directly affect health and welfare programs, including:

• The Consolidated Omnibus Budget Reconciliation Act (“COBRA”), which imposes continuation of health coverage requirements.
• The Affordable Care Act (“ACA”), which has provisions that eliminate lifetime dollar limits and preexisting condition exclusions, while mandating preventive care and other requirements.
• The Mental Health Parity and Addiction Equity Act (MHPAEA), which prohibits health plans from imposing stricter limits on mental health and substance use disorder benefits than on medical and surgical benefits.
• The No Surprises Act, which addresses balance billing and enhances transparency in health plans.

Currently, ERISA’s application to health and welfare plans has garnered significant attention as plan participants call into question the actions of plan fiduciaries through class-action lawsuits.

Recent Litigation Targets Decisions of Plan Fiduciaries

ERISA applies to most employer-sponsored benefits, setting forth specific standards governing how fiduciaries of ERISA-covered plans must act.¹ Recent class-action lawsuits filed against large corporations like Johnson & Johnson and Wells Fargo reflect a new wave of litigation challenging plan fiduciaries around their duty to act prudently in selecting and monitoring plan service providers, such as pharmacy benefit managers.  

While the outcomes of these cases are months, if not years, away, there will be a heightened burden on plan sponsors to understand their fiduciary obligations and administer plans accordingly as we move into the next 50 years of ERISA.

While plan fiduciaries should continue to carry out their fiduciary requirements, a recent Supreme Court decision puts plan sponsors in a new regulatory environment.

Regulation in a Post-Chevron Environment

On June 28, 2024, the U.S. Supreme Court held that the Administrative Procedure Act (APA) requires federal courts to exercise their independent judgment on whether an agency has acted within its statutory authority and can no longer defer to agency interpretation of the law.

This decision overturned the long-standing precedent established in Chevron U.S.A., Inc., v. Natural Resources Defense Council, Inc. (“Chevron”), which required federal courts to defer to an executive agency’s reasonable interpretation of ambiguous statutory provisions that the agency administers (often referred to as Chevron deference).

For health and welfare plans, statutes often leave little guidance on how compliance requirements are to be implemented. Historically, agency rulemaking and sub-regulatory guidance had provided a pathway for employers. However, in a post-Chevron environment, the door is open for new challenges to agency interpretations. Given the lack of deference afforded to their interpretations, the decision may also impact how agencies approach the rulemaking process and their willingness to issue guidance on various matters. Going forward, employers will need to pay careful attention to court decisions along with agency rules and regulations to meet compliance obligations.

For 50 years, ERISA has established the framework for employers sponsoring health and welfare plans to follow. Now health and welfare plans will be at the forefront as employers are challenged to wrestle with rising costs and added compliance complexities.

To learn more about these and other solutions designed to help you improve adherence to regulatory compliance and avoid penalties and fines, contact your local USI benefits consultant or email ebsolutions@usi.com.

¹ ERISA does not apply to governmental plans, church plans, or dependent care assistance plans, among others.