Amicus Curiae Brief — Metropolitan Life Insurance v. Massachusetts

Supreme Court of the United States

OCTOBER TERM, 1984

METROPOLITAN LIFE INSURANCE COMPANY,

. Appellant

COMMONWEALTH OF MASSACHUSETTS,

Appellee

THE TRAVELERS INSURANCE COMPANY,

. Appellant

COMMONWEALTH OF MASSACHUSETTS,

Appellee

On Appeal From The Supreme Judicial Court

Of The Commonwealth Of Massachusetts

BRIEF OF THE AMERICAN FEDERATION OF LABOR

AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE IN SUPPORT OF APPELLANTS

DAVID M. SILBERMAN

1000 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 833-9340

MARSHA BERZON

177 Post Street, Suite 700

San Francisco, CA 94108

(415) 421-7151

LAURENCE GOLD

(Counsel of Record)

815 16th Street, N.W.

Washington, D.C. 20006

(202) 687-5390

WILSON - Eres PRINTING Co.. INC. - 789-0096 - WASHINGTON, D.C. 20001

® BBP. 00

TABLE OF CONTENTS

INTEREST OF THE AMICUS CURIAE ..................

SUMMARY OF ARGUMENT 20.22.22... ececeeee

IIT eisterticentneneenesensicnsenccncinninnnenienceneesensscinsbiamnnsonnetets

CONCLUSION ....... see aiacseangitieniansaisnenendeanitnesetenecdemensemmsnceess

Page

ii

TABLE OF AUTHORITIES

Cases Page

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504

CBB eeiccsecccsicccnsnsniscasctnnnessenituntaeseniaeanane 2, 5, 6, 26

Franchise Tax Board v. Construction Laborers Va-

cation Trust, —— U.S. ——, 51 LW. 4945

*. ) | | ae eee 4

Machinists v. Gonzales, 356 U.S. 617 (1958) ........ 6

Malone v. White Motor Corp., 485 U.S. 497

| Fe ere 6

Shaw v. Delta Air Lines, Inc., —— U.S. ——, 51

L.W. 4968 (June 24, 1983) ..... ocean passim

Teamsters Union v. Oliver, 358 U.S. 283 (1959)... 6

Terminal Ass’n v. Trainmen, 318 U.S. 1 (1943)... 6

Statutes

Employee Retirement Income Security Act of 1974,

29 U.S.C. § 1001 (a) ..--.---con2-0000----- a<isieaala 3,

Liye, |

ee ee

29 U.S.C. § 1028 (a) (C) oeenceeccceeecseeeesseeceveeeeeeee

29 U.S.C. § 1081 (a) (2) ..--eeeeeccoeeecceeecnveeesnveeeoees

Ly eee

29 U.S.C. § 1108 (a) (2) -.naeeecceeeccceeecccneecessveeeenneee

29 U.S.C. § 1136

29 U.S.C. § 1144

National Labor Relations Act, 29 U.S.C. § 151

“SREREKES

TE GBT) ceecece es ccsnscncnmesisinisiictemeneainasinnnanin 5-6

Welfare and Pension Plans Disclosure Act, 72 Stat.

FED enccennecceaseesensisiipeninssisieesiiaslacs alin aananannnn 6

Mass. Gen. Laws ch. 175, § 47B _.0.o- o.oo ceeneeeee eee passim

Legislative Materials

Senate Committee on Labor and Public Welfare,

Legislative History of the Employee Retirement

Income Security Act of 1974 000-000 passim

Senate Committee on Labor and Public Welfare,

Subcommittee on Labor, Hearings on Pension

and Welfare Plans, 90th Cong., 2d Sess. (1968) .. 11

iii

TABLE OF AUTHORITIES—Continued

Page

House Committee on Education and Labor, Gen-

eral Subcommittee on Labor, Hearings on Pri-

vate Welfare and Pension Plan Legislation, 91st

Cong., 1st and 2d Sess. (1970) ............-.-.-.---------- 13-14

S. Rep. 92-1150, 92nd Cong., 2d Sess. (1972) .......... 15

S. Rep. 93-127, 93rd Cong., 1st Sess. (1973) ...... 11, 16-18,

24

H.R. Rep. 93-533, 93rd Cong., 1st Sess. (1973) ..16-17, 24

H.R. Rep. 93-779, 93rd Cong., 2d Sess. (1974) ........ 24

H.R. Rep. 93-807, 98rd Cong., 2d Sess. (1974) ...... 18

H.R. Rep. 94-1785, 94th Cong., 2d Sess. (1977)... 20-23

ITIL xiscsccisecttsnsetecscceseemsersomsereceveriecsesesceseess 12, 13

eee 15

i i niieeceiitmmacnnsneimennineieccsencusenees 19-20

Miscellaneous

Hutchinson & Ifshin, Federal Preemption of State

Law Under the Employment Retirement Income

Security Act of 1974, 46 U. Chi. L. Rev. 2

iii iiceiieentinaendnteenenmnneneenaweesaneccoees 10

National Association of State Alcohol and Drug

Abuse Directors, Private Health Insurance Cov-

erage for Alcoholism and Drug Dependency

Treatment Services: State Legislation that

Mandates Benefits or the Offering of Benefits

for Purchase (July, 19838) .....................----.----00---- 8

Turza & Halloway, Preemption of State Law Un-

der the Employee Retirement Income Security

Act of 1974, 28 Cath. U. L. Rev. 163 (1979)

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

Nos. 84-325 and 84-356

METROPOLITAN LIFE INSURANCE COMPANY,

Appellant

v.

COMMONWEALTH OF MASSACHUSETTS,

Appellee

THE TRAVELERS INSURANCE COMPANY,

Appellant

Vv.

COMMONWEALTH OF MASSACHUSETTS,

Appellee

On Appeal From The Supreme Judicial Court

Of The Commonwealth Of Massachusetts

BRIEF OF THE AMERICAN FEDERATION OF LABOR

AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

AS AMICUS CURIAE IN SUPPORT OF APPELLANTS

The American Federation of Labor and Congress of

Industrial Organization (“AFL-CIO”) submits this brief

amicus curiae with the consent of the parties pursuant to

the rules of this Court.

2

INTEREST OF THE AMICUS CURIAE

The AFL-CIO is a federation of 95 national and inter-

national labor organizations representing approximately

13,000,000 employees throughout the United States. These

unions engage in collective bargaining in an effort to

secure for the employees they represent the terms and

conditions of employment those employees desire.

It is the experience of the AFL-CIO and of its affiliates

that state laws of the type at issue here make that task

more, rather than less, difficult by substituting for private

decision-making a state-imposed requirement that, if cer-

tain benefits are agreed to (here, insurance for hospital

and surgical expenses), other benefits must also be pro-

vided (here, insurance for treatment of mental illness)

regardless of whether the employees desire such benefits

or would prefer other benefits (or higher wages) instead.

The AFL-CIO submits this brief amicus curiae to demon-

strate that Congress intended to protect the autonomy of

private decision-making with respect to these matters.

SUMMARY OF ARGUMENT

Section 514 of ERISA, 29 U.S.C. § 1144, states the

general ERISA preemption rule: the Act “shall super-

sede any and all state laws insofar as they may now or

hereafter relate to any employee benefit plan. . .” Stand-

ing alone, that section would undoubtedly preempt the

portion of the Massachusetts law at issue here for, as the

Massachusetts court recognized, the state law “effectively

control[s] the content of insured welfare benefit plans”

and thus “relate[s] to” such plans. J.S. 20a. And the

preemptive force of § 514(a) is enhanced by the federal

labor laws which embody an “additional federal interest

in precluding state interference with labor-management

negotiations.” Alessi v. Raybestos-Manhattan, Inc., 451

U.S. 504, 525 (1981). Part A, pp. 4-6 infra.

The court below relied on the ERISA “savings clause”

—which provides that “nothing in this subchapter shall

3

be construed to exempt or relieve any person from any

law of any State which regulates insurance. .. ,” ERISA

§ 514(b) (2) (A), 29 U.S.C. § 1444(b) (2) (A) —to sustain

the Massachusetts law. The court read the key words in

that clause—“law . .. which regulates insurance’—to

save any statute which, in form, is addressed to insurers

and which does not “conflict with the policies or operation

of ERISA.” J.S. 5a. And the court concluded that the

Massachusetts law at issue here is not in conflict with

ERISA—and thus is not preempted—because it “affects

only the substantive contents of plans.” Jd. 22a.

On its face, the decision below is an implausible con-

struction of the savings clause. Nothing in the language

of that clause bespeaks a congressional intent to set the

courts at large to determine, on an ad hoc basis, which

state laws conflict with ERISA’s policies. Furthermore,

the effect of the decision below is to transform ERISA—

which was enacted to “assur[e] the. . . financial sound-

ness” of benefit plans, ERISA § 2(a), 29 U.S.C. § 1001(a)

—into a law which places insured plans at a disadvantage

as compared to self-insured plans and thereby discourages

the use of insurance to fund benefit plans. Part B, pp.

6-10, infra.

That is not what Congress intended. The legislative

history, which we review in detail, Part C(1), pp. 10-23,

infra, proves that Congress sought to protect the auton-

omy of private decisions with respect to the content of

benefit plans, and that to the extent regulation was de-

sirable, Congress concluded that uniform regulation was

required to accommodate the needs .of. multi-state plans.

Congress also sought to encourage the use of insurance to

fund benefit plans. The Savings clause—which Congress

viewed as a narrow exception to the broad preemption

rule of § 514(a)—was not intended effectively to nullify

those policies by authorizing state regulation of the con-

tents of insured plans through the form of insurance reg-

lation. Rather, to make sense of the statutory language

and policies, the phrase “law . . . which regulates insur-

ance” must be understood to mean a law that both in

4

form and in substance is addressed to the conduct of

insurers, and not to the content of benefit plans. Accord-

ingly, the Massachusetts law at issue here falls outside

the savings clause and thus is preempted by § 514(a).

Part C(2)-(3), pp. 23-27, infra.

ARGUMENT

The Massachusetts statute at issue in this case states

that “[a]ny blanket or general policy of insurance...

which provides hospital expense and surgical expense

insurance ... or any employees’ health and welfare

fund which provides hospital expense and surgical expense

benefits . . . shall provide benefits for expense .. .

arising from mental or nervous conditions ...” Mass.

Gen. Laws ch. 175, §47B. It is common ground that,

under the Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C .§ 1001 et seq., a state may

not in terms require an employee benefit plan to provide

any particular benefits and that therefore insofar as the

Massachusetts law applies directly to such plans, the statute

is preempted by ERISA. But the Massachusetts Supreme

Judicial Court held that under ERISA a state may “effec-

tively control the content of insured welfare benefit

plans,” J.S. 20a, so long as the state does so “indirectly

through its insurance laws,” id. 6a.

As we proceed to show, that holding is erroneous:

ERISA—both standing alone and when read in conjunc-

tion with the federal labor laws—precludes the states

from controlling the nature and quantum of benefits pro-

vided by an employee benefit plans regardless of the

form of the state regulation.

A. Section 514 of ERISA, 29 U.S.C. § 1144, is a “vir-

tually unique preemption provision.” Franchise Tax

Board v. Construction Laborers Vacation Trust,

US. , 51 L.W. 4945, 4952 n.26 (June 24, 1983).

Subsection (a) of that section states the general ERISA

preemption rule: the Act “shall supersede any and all

state laws insofar as they may now or hereafter relate to

5

any employee benefit plan...” “The breadth of § 514(a)’s

pre-emptive reach is apparent from that section’s lan-

guage. A law ‘relates to’ an employee benefit plan, in

the normal sense of the phrase, if it has a connection

with or reference to such a plan.” Shaw v. Delta Air

Lines, Inc., —— U.S. ——, 51 L.W. 4968, 4971 (June 24,

1983).

If §514(a) stood alone, there would be no doubt that

the portion of the Massachusetts law at issue here would

be preempted. As the Massachusetts court observed,

under the state statute “a plan that purchases insurance

has no choice but to provide mental health care benefits”

and thus the law “effectively control's] the content of

insured welfare benefit plans.” J.S. 20a. Based on that

fact, and based upon its reading of Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504 (1981)—in which this

Court held that §514(a) preempis a state statute pro-

hibiting set-offs of workers compensation payments

against pension benefits—the Massachusetts court con-

cluded that the Massachusetts statute “is a law that ‘re-

late[s] to’ benefit plans within ERISA’s general preemp-

tion clause.” J.S. 20a.

Alessi also points to “[a]nother consideration [which]

bolsters [this] conclusion.” 451 U.S. at 525. As the

Court there noted, under the National Labor Relations

Act, as amended, there is an “additional federal interest

in precluding state interference with labor-management

negotiations,” id.; reading that Act in conjunction with

ERISA the Alessi Court concluded that it is “federal

policy” to assure that employee benefits are “a subject of

either labor-management negotiations or federal legisla-

tion,” id. at 526 n.22. The Massachusetts statute at

issue here is squarely contrary to that policy.’

1TIt is not at all clear how far the federal policy favoring free

collective bargaining, standing alone, would go in preempting

state regulation of benefit plans. The NLRA is silent with respect

to the issue of preemption, and “the statutory implications of what

6

B. The Massachusetts court nonetheless sustained the

state statute, relying on subsection ‘b) (2) (A) of ERISA

§ 514—the “savings clause,” 29 U.S.C. § 1144(b) (2) (A).

That clause provides, in pertinent part, that “nothing in

this subchapter shail be construed to exempt or relieve

any person from any law of any State which regulates

insurance...” The court below held—erroneously as we

now show—that insofar as it applies to insured benefit

plans the Massachusetts statute is a “law ... which

regulates insurance” within the meaning of that clause.

As the Massachusetts court recognized, the bare words

of the savings clause are “of little help” in ascertaining

its sweep. J.S. at 22a. That clause could, of course, be

read to save from preemption al] state statutes which,

in form, are addressed to an insurance company, regard-

less of the substance of the statute or its impact on bene-

fit plans. But such a reading would mean that, with re-

has been taken from the States and what has been left to them

are of a Delphic nature. . .” Machinists vy. Gonzales, 356 U.S. 617,

619 (1958). This Court recognized years ago that “[s]tate laws

have long regulated a great variety of conditions in . . . industry,”

and “it cannot be that the minimum requirements laid down

by state authority are all set aside” by federal law. Terminal

Ass'n V. Trainmen, 318 U.S. 1, 6-7 (1943). On the other hand,

it is equally clear that the states cannot be wholly free to “limit[ }

the solution that the parties’ agreement can provide to the problem

of wages and worling conditions.” Teamsters Union Vv. Oliver, 358

U.S. 283, 295-96 (1959). See also Brief of the AFL-CIO as Amicus

Curiae in No. 83-1748, Allis Chalmers Corporation v. Lueck at pp.

8-6 & n.3.

It is not necessary in this case for the Court to decide where the

NLRA, standing alone, would require that the line be drawn be-

tween what “has been taken from the States and what has been

left to them.” Malone v. White Motor Corp., 485 U.S. 497, 505

(1978), teaches that, prior to ERISA, the Welfare and Pension

Plans Disclosure Act (“WPPDA”), 72 Stat. 997, provided “a far

more reliable indicium of congressional intent with respect to state

authority to regulate pension plans” than did the NLRA. And the

same is now true with respect to ERISA, the successor to the

WPPDA. See also Alessi, supra, 451 U.S. at 526 n.23. At most.

then, as in Alessi, the NLRA here “bolsters” the conclusion de-

rived from ERISA § 514(a).

T

spect to insured plans, the states would be free to regu-

late the very subjects regulated by ERISA, and to do so

in a manner inconsistent with ERISA. For example, un-

der that reading of the savings clause a state could,

through ostensible insurance regulation, mandate that

pensions in insured plans fully vest after an employee

completes only five years of service, even though Con-

gress, in enacting ERISA, opted for a ten-year vesting

requirement. See ERISA § 203(a). Such a broad read-

ing of the savings clause thus would “permit the State,

through its insurance laws, to reach far into areas gov-

erned by ERISA, and thereby negate the unniistakable

intent of Congress to work a broad preemption,” as the

Massachusetts court conceded. J.S. at 21a.

The court below therefore eschewed such a reading of

the savings clause, concluding, instead, that to be saved

by that clause a state law must not only satisfy certain

formal requirements (i.e. be addressed, in terms, to in-

surers) but also must “not conflict with the policies or

operation of ERISA.” J.S. at 5a; see also id. at 22a.

That court determined that there is no conflict between

the Massachusetts law at issue here and ERISA because

the state law “affects only the substantive content of

plans,” a subject which, according to the state court, is

“completely untouched by ERISA’s regulatory provisions.”

Id. at 22a (emphasis added) ; see also id. at 5a n.4.

In reaching this conclusion the Massachusetts court

rejected the proposition that by mandating insured-

plan benefits the Massachusetts laws interfered with a

congressional decision “to designate an area of private

self-determination with respect to choice of benefits,”

as that court found no “persuasive evidence in the legisla-

tive history of an affirmative policy to curtail State police

power in favor of private decision-making.” Jd. at 23a.

And the court below likewise rejected the contention that

state mandated-benefits conflict with a policy of allowing

“interstate employers to maintain uniform plans,” id.

8

at 5a-6a, concluding that to attribute such an intent to

Congress would be “inconsistent . . . with the broad lan-

guage of the insurance exemption,” id. at 6a, which ex-

emption, in that court’s view, proved that Congress “could

not have intended to mandate complete uniformity for

the convenience of multi-state employers,” id. at 24a.

As we proceed to show, the Massachusetts court has

misunderstood Congress’ intent. The legislative history of

ERISA demonstrates that Congress emphatically pro-

tected private decision-making with respect to the content

of benefit plans and that to the extent regulation was

desirable, Congress concluded that uniform federal regu-

lation was required to accommodate the needs of multi-

state plans. Given that intent, the phrase “law . . . which

regulates insurance” as used in the savings clause cannot

be understood to mean a law which only in form is ad-

dressed to insurers. Rather, to satisfy this definition, a

statute also must, in substance, concern the decisiors of

insurers, and not decisions of benefit-plan administrators

or sponsors on such fundamental matters as what bene-

fits to provide. In other words, a “law . . . which regu-

lates insurance” is one as to which the burden of com-

pliance falls direcily on insurers rather than on benefit

plans. A law mandating that particular benefits be pro-

vided by insured plans thus is not a “law . . . which

regulates insurance” under the savings clause.”

2In contrast, and by way of illustration, a law that required

insurers to offer certain options in health insurance—for example,

a mental health option—is a law regulating insurance (as are

the more familiar forms of insurance regulation such as reserve

requirements, reporting requirements for insurers, and the like).

Such laws do not attempt to regulate the contents of benefit plans.

A number of states have enacted laws mandating insurance op-

tions, at least with respect to treatment for alcoholism and drug de-

pendency. See National Association of State Alcohol and Drug

Abuse Directors, Private Health Insurance Coverage for Alco-

holism and Drug Dependency Treatment Services: State Legisla-

tion that Mandates Benefits or the Offering of Benefits for Pur-

chase at 5-6 (July, 1983).

9

Before turning to the legislative history we pause

briefly to make two observations about the decision below

—observations which highlight the implausibility of that

decision.

First, it is important to note that the Massachusetts

court failed to propose any definition of the critical stat-

utory phrase “law . . . which regulates insurance” in the

savings clause. Instead that court adopted what it

termed a “conflict-based analysis” under which the deter-

mination of whether a particular law is within or out-

side the savings clause depends on a judicial decision, on

a case-by-case basis, as to whether the law “conflict([s]

with the policies or operation of ERISA.” J.S. 5a. But

nothing Congress said bespeaks an intent to set the

courts at large to undertake such an ad hoc “conflict-

based analysis.” *

Second, under the decision below, states may man-

date benefits for insured plans, but not for self-insured

plans.* Consequently, insured plans will be put at a dis-

advantage as compared to self-insured plans; in Massa-

chusetts, for example, an employer and union could agree

to a health program that did not include mental health

8It is also noteworthy that in Shaw, supra, the Court squarely

rejected the proposition that ERISA preempts only state laws that

are inconsistent with it. See 51 L.W. at 4971, 4973 & n.25. The

Massachusetts court questioned that aspect of Shaw’s holding. See

J.S. 6a.

* With respect to self-insured plans, the “deenier clause,” ERISA

§ 514(b) (2) (8), 29 U.S.C. § 1144(b) (2) (B), precludes any pos-

sible attempt by a state to use its insurance law to circumvent

§ 514(a)’s preemptive force. The deemer clause provides in per-

tinent part:

Neither an employee benefit plan ... nor any trust estab-

lished under such a plan, shall be deemed to be an insurance

company or other insurer ... or to be engaged in the busi-

ness of insurance for purposes of any law of any State purport-

ing to regulate insurance companies, insurance contracts. . .

10

coverage only by creating a self-insured plan. And were

other states to mandate other benefits that those states

deem desirable, that “would make administration of a

uniform nationwide plan more difficult,” Shaw v. Delta

Air Lines, supra, 51 L.W. at 4973 n.25, presenting multi-

state plans with the “Hobson’s choice” of “either aban-

don[ing] the funding of benefit plans threugh insurance

policies or . . . accept{ing] all-encompassing uniform na-

tional contracts” that provide every benefit required by

any state.®

It is most unlikely, to say the least, that a statute

which was enacted for the very purpose of “assuring the

equitable character ... and... financial soundness” of

benefit plans, ERISA § 2(a), 29 U.S.C. § 1001 (a)—based

upon Congress’ finding that “the soundness and stability

of plans . .. may be endangered,” id—was meant to

discourage the use of insurance as a method of funding

benefit plans and to encourage self-insurance instead.

See also pp. 24-25, infra. Yet that is the necessary con-

sequence of the decision below. Not surprisingly, the leg-

islative history demonstrates that Congress intended no

such anomaly.

C. 1. The legislative history of ERISA begins in the

Ninetieth Congress. During that Congress the Johnson

administration submitted two bills (S. 1024 and S. 3421),

which together would have established comprehensive fed-

eral regulation of employee benefit plans; those bills were

introduced by Senator Yarborough as chairman of the

Senate Committee on Labor and Public Welfare. During

the same Congress, Senator Javits, the ranking minority

* Hutchinson & Ifshin, Federal Preemption of State Law Under

the Employment Retirement Income Security Act of 1974, 46 U.

Chi. L. Rev. 23, 68 (1978).

11

member of that committee, submitted his own bill (S.

1103) to regulate employee benefit plans.®

For present purposes what is most significant about

the Yarborough and Javits bills is that both expressly

disclaimed any preemptive effect. Section 18(a) of S.

1024, one of the Yarborough bills, provided:

The provisions of this Act . . . shall not be held to

except or relieve any person from compliance with

any Federal or State law imposing affirmative obli-

gations, duties, responsibilities or other standards of

conduct with respect to the operation or administra-

tion of employee welfare or pension benefit plans.’

And § 508 of the Javits bill provided:

Nothing in this Act shall ‘be deemed to nullify any

provision of any State or Federal law not in direct

conflict with a provision of this Act.

The Senate committee held hearings in 1968 on the

various pension bills that had been introduced, see Sen-

ate Committee on Labor and Public Welfare, Subcom-

mittee on Labor, Hearings on Pension and Welfare Plans,

90th Cong., 2d Sess. (1968), but no legislation was re-

ported by the committee.

*As Senator Javits observed, both “the administration bill as

well as my own are heavily based upon the Cabinet Committee’s

report on private pension plans.” Senate Committee on Labor and

Public Welfare, Subcommittee on Labor, Hearings on Pension and

Welfare Plans, 90th Cong. 2d Sess. 165 (1968). The Cabinet Com-

mittee, which had been appointed by President Kennedy in 1962,

submitted a report in 1965 calling for remedial legislation in a num-

ber of areas. See S.Rep. 93-127, 93rd Cong., Ist Sess. 7 (1973)

(discussing report).

7§.1024, the bill of which the quoted section was a part, ad-

dressed only reporting, disclosure and fiduciary requirements; the

Johnson administration proposed a separate bill, 8.3421, to estab-

lish minimum vesting and funding requirements and to create

federal pension inst ince. That latter bill had no preemption pro-

vision at all.

12

Work on federal pension legislation continued in the

Ninety-First Congress. The various bills from the prior

session were all reintroduced. See S.2167 (Javits bill) ;

§.4326, 4827 (Johnson administration bills). In addition,

the new Secretary of Labor, George Shultz, prepared a

new piece of legislation, S.38859, supported by the Nixon

administration, which was introduced for the administra-

tion by Senator Javits, see 116 Cong. Rec. 7278. That bill

was more limited in scope than the original Javits’ bill in

that the Nixon administration bill did not have any mini-

mum vesting or funding provisions but rather established

only reporting and disclosure requirements and fiduciary

standards. But for present purposes, the Nixon adminis-

tration bill is significant because, unlike its predecessors,

that bill would have had the effect of preempting state

law with respect to the subjects the bill regulated. Spe-

cifically, § 18 of that bill provided:

It is hereby declared to be the express intent of Con-

gress that . . . the provisions of this Act shall super-

sede any and all laws of the States and of political

subdivisions thereto insofar as they may now or here-

after relate to the fiduciary, reporting and disclosure

responsibilities of persons acting on behalf of em-

ployee benefit plans.

Furthermore, the Nixon administration bill contained a

“savings clause” which was identical to the one even-

tually enacted in ERISA: “nothing herein shall be

construed to exempt or relieve any person from any law

of any State which regulates insurance, banking or se-

curities.” $.3589, § 18, 91st Cong., 2d Sess.

In introducing the Nixon administration bill, Senator

Javits placed into the Congressional Record an explana-

tory statement and section-by-section analysis which

said in pertinent part:

The Act provides for a uniform source of law for

evaluating the fiduciary conduct of persons acting on

behalf of employee benefit plans and a singular re-

13

porting and disclosure system in lieu of the burden-

some multiple reports.

Section 18 designates the Act as the exclusive form

of regulation for employee benefit plans within the

areas covered, but provides that State laws which

otherwise regulate insurance, banking and securities

shall remain operative. [116 Cong. Rec. 7286, 7288]

Thus, at its creation, the eombined force of an express

preemption provision and the savings clause was stated

to be to provide “exclusive [federal] regulation for em-

ployee benefit plans within the areas covered” by federal

law and to preserve state laws that “otherwise regulate

insurance.”

No hearings were held in the Senate during the Ninety-

First Congress with respect to the various pension bills,

but hearings were held by Representative Dent’s General

Subcommittee on Labor of the House Labor and Educa-

tion Committee. See House Committee on Education and

Labor, General Subcommittee on Labor, Hearings on Pri-

vate Welfare and Pension Plan Legislation, 91st Cong.,

lst and 2d Sess. (1970). At those hearings, Secretary of

Labor Shultz testified in support of the Nixon administra-

tion bill (which had been introduced in the House, with-

out any explanation, by Rep. Ayres, as H.R. 16462, see

116 Cong. Rec. 7453). In his testimony Secretary Shultz

laid down certain principles for developing federal regu-

lation of benefit plans—principles that continued to be

followed over the years during which ERISA was formu-

lated, and are of relevance in understanding the preemp-

tion provision of ERISA:

A balance of concerns exist that must be weighed

in judging the private pension system. I am con-

cerned about the worker whose expectations of receiv-

ing a pension after long years of service are disap-

pointed because of the absence of a suitable vesting

provision; about the workers who lose their accrued

14

pension rights for lack of sufficient funds in a plan

when it is prematurely terminated; about the ade-

quacy of the level of benefits for our retired workers,

and about the restrictions on individual choice of

benefit level built into our present system.

- * 7

I am also concerned lest the Government intrude

itself unduly into free collective bargaining about

pensions; and I am concerned that private pension

plans not lose their flexibility and their adaptability

to meet needs in widely different circumstances, and

about impairing the competitive position of the em-

ployers who provide pension coverage for their em-

ployees as against those who do not.

The need for uniform standards to guarantee bene-

fit security also must be balanced against the possible

loss of some freedom and flexibility in plan design

and operation, which are valuable characteristics of

the private system. [Hearings on Private Welfare

and Pension Plan Legislation, supra, at 473-74 (em-

phasis added) ]

Secretary Shultz went on to discuss the Nixon adminis-

tration bill, explaining the rationale for its preemption

provision as follows:

Administrators of plans covering employees in several

or more States will not have the burden of complying

with several sets of State laws, rules, and regula-

tions. They will be able to formulate procedures and

conduct themselves with reference to one uniform

law.

Participants and beneficiaries will be able to judge

fiduciary conduct according to a uniform standard.

[Id. at 481]

Although the Nixon administration bill (along with

all other pension bills) died in committee in the Ninety-

First Congress—and although eventually a law was en-

acted far broader than that proposal—the bill nonethe-

a

15

less marked a turning point insofar as the preemption

issue was concerned. From that time forward, every

major bill that was introduced into Congress contained

a preemption provision at least as broad as the one pro-

posed by the Nixon administration, and each contained

that administration’s savings clause. This is true both

of the bills introduced in the Ninety-Second Congress,*®

and also of the biils introduced in the Ninety-Third Con-

gress, the one that enacted ERISA.

In the Ninety-Third Congress two bills became the

focal points for the legislative effort to regulate benefit

plans: §.4, introduced by Senators Williams and Javits,

see Senate Committee on Labor and Public Welfare,

Legislative History of ERISA at 98-190 (“Leg. Hist.”),

and H.R. 2, introduced by Representative Dent, see 1 id.

at 3-67.° Each contained a preemption provision that

® For example, at the start of the Ninety-Second Congress, Senator

Javits introduced a modified version of the comprehensive pension bill

he had offered in the prior Congress; his new bill, however, in-

cluded a provision which, subject to the savings clause, would have

preempted all state laws with respect to “the subject matters regu-

lated by this Act.” S.2, § 507, 92nd Cong. 1st Sess. (In introducing

the bill, Javits noted this as one of the “more important differences”

from his prior bill. 117 Cong. Rec. 283.) Similarly, Rep. Dent—

who in the prior legislative session had introduced the Johnson

administration bills with their non-preemptive provision, see H.R.

1045, 1046, 91st Cong. 1st Sess. (1971)—introduced in the 92nd

Congress a bill that was pre-emptive with respect to state regula-

tion of reporting, disclosure and fiduciary requirements. H.R. 1269

§ 115, 92nd Cong. 1st Sess. (1971).

The Dent bill was not reported out of committee; the Javits bill

was superseded by 8.3598, 92nd Cong., 2d Sess., a bill which Sena-

tors Williams and Javits jointly introduced as a substitute for S.4.

The Williams-Javits bills was reported out of the Senate Labor

Committee, see S. Rep. 92-1150, 92nd Cong., 2d Sess. (1972) but

was not acted upon by the Senate.

® As introduced, S.4 was identical to S.3598 as the latter had been

reported out of the Senate Labor Committee in the prior Congress.

See n.8 supra.

In addition to the bills mentioned in text, the Senate Finance

Committee and House Ways and Means Committee developed their

16

was identical to its immediate predecessor: in S.4 a pro-

vision (§ 609) preempting state laws pertaining to “the

subject matters regulated by this Act,” 1 Leg. Hist. at

186-87; and in H.R. 2 a provision (§ 114) preempting

state regulation of reporting, disclosure, and fiduciary

requirements, 1 Leg. Hist. at 50-51. Each bill also con-

tained a savings clause identical to the one eventually

enacted.

The Senate bill was reported from committee with its

preemption provision intact, 1 id. at 582-85; in the House

committee the preemption provision was broadened so as

to apply to state regulation of vesting and funding as

well as to state regulation of reporting, disclosure and

fiduciary standards, and the bill was then reported to the

House, 1 id. at 2345-57.°

The reports of the two committees reveal a common

animating philosophy. Both reports declare the same

general approach to federal regulation of employee bene-

fit plans:

The Bill . . . represents an effort to strike an appro-

priate balance between the interests of employers and

labor organizations in maintaining flexibility in the

design and operation of their pension programs, and

the need of the workers for a level of protection

which will adequately protect their rights and just

expectations. . . . This legislation strikes an appro-

own bills to amend the tax laws as they pertained to benefit plans.

See 1 Leg. Hist. at 230-73 (S.1179 as introduced by Sen. Bentsen) ;

1 id. 780-1068 (S.1179 as reported); 2 id. 2393-2584 (H.R. 12481

as submitted and reported). The tax bills did not present any

preemption issues. Eventually the tax bills and regulatory bills

were incorporated into a single piece of legislation. See also

n.12 infra.

10 In the House bill, as reported, the savings clause applied only

to state regulation of reporting, disclosure and fiduciary standards;

there was no savings clause with respect to the provision of the

bill preempting state regulation of vesting and funding. See 2

Leg. Hist. at 2345-47.

17

priate and equitable balance between . . . those who

advocate complete and stringent control of private

pensions and those who oppose any form of super-

visory or regulatory control. [S. Rep. 93-127, 93rd

Cong. Ist Sess. 13-14 (1973) ; H.R. Rep. 93-533, 93rd

Cong. 1st Sess. 9 (1973) ]

And each endorses the same approach towards preemp-

tion:

Because of the interstate character of employee bene-

fit plans, the Committee believes it essential to pro-

vide for a uniform source of law in the areas of vest-

ing, funding, insurance and portability standards,

for evaluating fiduciary and disclosure system in lieu

of burdensome multiple reports. As indicated pre-

viously ... the Act... provides that state laws

regulating banking, insurance or securities remain

unimpaired. [S. Rep. 93-127, swpra, at 35; H.R. Rep.

93-533, supra, at 17.]™

The Senate report is significant for one additional

reason. Both the Senate and House bills, as reported,

contained a provision—eventually enacted as ERISA

$506, 29 U.S.C. § 1136—authorizing the Secretary of

Labor to make “agreements for cooperation or mutual

assistance” with, or to “utilize .. . the facilities or serv-

ices of any department, agency, or establishment of .. .

any State or political subdivision of a State...” The

House report did not comment on this provision but the

Senate report did, stating:

The states of Wisconsin and New York, for example,

exercise supervision over certain pension and welfare

funds in their respective jurisdictions, and the ex-

perience and technical know-how of these state agen-

cies would be of valuable assistance to the Secretary.

It is not intended, however, that the state agencies

1! See also S. Rep. 93-127, supra, at 29 (stating need for uni-

formity with respect to fiduciary standards because “the operations

of employee benefit plans are increasingly interstate’) ; H.R. Rep.

93-533, supra, at 12 (same).

18

utilized would formulate or apply substantive stand-

ards to plans subject to this Act which differ from

the substantive standards in this Act. [S. Rep.

93-127, supra, at 17-18 (emphasis added) |

The Senate and House passed their respective bills

without altering the preemption provisions reported by

the responsible committees. See 2 Leg. Hist. 2103-05;

3 id. 4457-5922 In eenference, however, the preemption

provision was broadened still further, as this Court has

had occasion to note, Shaw v. Delta Air Lines, supra, 51

L.W. at 4971 & n.18: rather than preempting only

“state laws relating to the specific subjects covered by

ERISA” and thereby precluding only those laws that ac-

tually conflict with ERISA, § 514(a) was amended so as

to preempt state law that “relate to any employee benefit

plan,” i.e., all state laws on this subject.

Significantly, the legislative history indicates—and

contemporaneous observers confirm “—that the preemp-

12 The Senate bill was passed, as a non-germane amendment to

H.R. 4200, a minor tax bill which had been approved by the House;

this wae done because the bill approved by the Senate made “major

changes in our tax laws” and if the Senate were “to proceed to

pass S.4 under that number the House would refuse to consider

the bill on the constitutional grounds that revenue bills must

originate in the House of Representatives.” 2 Leg. Hist. at 1879.

In the House, after H.R. 2 was reported, the Labor Committee

worked with the Ways and Means Committee to develop, as H.R.

12906, a revised version of H.R. 2 and, as H.R. 12855, a tax-code

analogue for the regulatory provisions. See H.R. Rep. 93-807, 93rd

Cong. 2d Sess. 1 (1974) (Ways and Means Report). Those two

bills were adopted as amendments to H.R. 2, and, with those

amendments, H.R. 2 was approved by the House. The Senate then

adopted its bill as an amendment to H.R. 2. 2 Leg. Hist. 3597-99.

13 See Turza & Halloway, Preemption of State Law Under the Em-

ployee Retirement Income Security Act of 1974, 28 Cath. U. L.

Rev. 163, 167 (1979) (preemption provision broadened “ijn

response to organized labor’s concern over state regulation of pre-

paid legal service plans and both business’ and organized labor’s

19

tion provision was broadened in conference in order to

protect the autonomy of benefit plans, and in particular,

to guard against threatened state regulation of the sub-

stance of prepaid legal service plans. Representative

Dent alluded to this concern in his remarks to the House

concerning the conference preemption provision, see 120

Cong. Rec. 29197 (preemption provision would apply to

“any rule, regulation, practice or decision of any .. . pro-

fessional society or association operating under code of

law”), and Senator Williams stated the point explicitly in

his post-conference statement to the Senate:

Consistent with this principle, State professional asso-

ciations acting under the guise of State-enforced pro-

fessional regulation, should not be able to prevent

unions and employers from maintaining the types of

employee benefit programs which Congress has au-

thorized—for example, prepaid legal services pro-

grams—whether closed or open panel. . . [Jd. at

29933]

Furthermore, during the Senate debate on the conference

bill, Senator Taft engaged Senators Williams and Javits

in a colloquy concerning legal service plans during

which Senator Javits stated that “the State, directly or

indirectly through the bar, is preempted from regulating

the form and content of a legal service plan,” 3 Leg.

Hist. at 4789, and Senator Williams added:

This is an area that will not give to bar associations

the authority to undo what we, in Congress, have

permitted to be done, that is, giving employers and

unions the freedom to develop and operate legal serv-

ice plans of their choice. [3 Id. at 47900]

The debate on the conference bill is significant for a

further reason: it reveals that Congress intended the

ERISA preemption rule to be sweeping and the excep-

tions narrow. For example, Representative Dent stated:

concern about the increasing state regulation of interstate plans’’).

The principal author of this article was a legislative aide to Senator

Javits when ERISA was enacted.

20

I wish to make note of what is to many the crowning

achievement of this legislation, the reservation to

Federal authority of the sole power to regulate the

field of employee benefit plans. With the preemption

of the field, we round out the protection afforded par-

ticipants by eliminating the threat of conf cting and

inconsistent state regulation. .. .

The conferees, with the narrow exceptions specifi-

ca'ly enumerated, applied this principle in its broad-

est sense to foreclose any non-Federal regulation of

employee benefit plans. [120 Cong. Rec. 29197]

Similarly, Senator Williams stated:

It should be stressed that with the narrow exceptions

specified in the bill, the substantive and enforcement

provisions of the conference substitute are intended

to preempt the field for Federal regulations, thus

eliminating the threat of conflicting or inconsistent

State and local regulation of employee benefit plans.

This principle is intended to apply in its broadest

sense to all actions of State or local governments, or

any instrumentality thereof, which have the force or

effect of law. [Jd. at 29933]

And Senator Javits added:

Although the desirability of further regulation—at

either the State or Federal level—undoubtedly war-

rants further attention, on balance, the emergence of

a comprehensive and pervasive Federal interest and

the interests of uniformity with respect to interstate

plans required—but for certain exceptions—the dis-

placement of State action in the field of private em-

ployee benefit programs. . . . If it is determined that

the preemption policy devised has the effect of pre-

cluding essential legislation at either the State or

Federal level, appropriate modification can be made.

[Id. at 29942]

A fair summary of the congressicnal understanding of

§ 514 was provided in a report issued by the House Sub-

committee on Labor Standards, chaired by Rep. Dent,

21

pursuant to a mandate contained in ERISA § 3022(a),

during the congressional session immediately after ERISA

was enacted. That report states:

ERISA, among its many provisions, provides for a

significant adjustment in the regulatory roles of state

and federal authority with respect to the various

elements of the employee benefit plan field. The pro-

visions of section 514 expressly reserve to Federal

authority the regulation of employee benefit plans

subject to the jurisdiction of the Act. In electing

deliberately to preclude state authority over these

plans, Congress acted to insure uniformity of regula-

tion with respect to their activities. There was a rec-

ognition of the necessity for the preservation of some

state activity in this field and certain limited excep-

tions were made to the broad preemption scheme. In

general these exemptions are designed to save state

law as it is applid to entities which are not employee

benefit plans as defined in section 4(a) and not ex-

empt under section 4(b), to the extent that such

regulation does not relate to employee benefit plans.

From the early 1970’s the legislative activities

which eventually produced ERISA involved various

framings of preemption schemes. The Committee’s

hearing record prior to 1974 contains numerous dis-

cussions of the propriety of one approach or another.

* ERISA § 3022(a) required a “full study and review,” during

the Congress following enactment of the law, of several subjects

including “(4) the effects and desirability of the Federal preemp-

tion of State and local law with respect to matters relating to pen-

sion and similar plans.” The study was to have been conducted by

the “Joint Pension Task Force” which was to be composed of the

staffs of the various committees that had been responsible for the

enactment of ERISA. See ERISA §§ 3021, 3022. The Joint Task

Force was never constituted, however, and Rep. Dent’s committee,

acting pursuant to Rule X of the Rules of the House of Representa-

tives for the Ninety-Fourth Congress, created its own Task Force on

Welfare and Pension Plans. That Task Force conducted lengthy

oversight hearings (some in conjunction with the House Ways and

Means Committee) and issued the report quoted in text. See H.R.

Rep. 94-1785, 94th Cong., 2d Sess. 88 (1977).

22

Once it had become clear that our policy would be the

creation of uniform national standards, the problem

was to extract these plans from the regulatory

schemes in the several states without creating un-

toward side effects.

A number of states had undertaken to regulate em-

ployee benefit plans as such; others had already made,

or appeared ready to declare, these plans subject to

state control as insurers, trust companies, or invest-

ment companies. From a drafting standpoint the

difficulty arose in attempting to extricate these plans

from the framework of state insurance, trust and

securities regulation even though their activities

might very well bring them within the sphere of

conduct historically subject to such regulation. On

the one hand it was clear that the plans subject to

ERISA needed to be freed of the possibility of state

regulation; on the other hand, it was important to

limit the effects of preemption, in order to avoid

disrupting state efforts to regulate the conduct of

other financial entities not subject to the federal

Act.

Based on our examination of the effects of section

514, it is our judgment that the legislative scheme of

ERISA is sufficiently broad to leave no room for

effective state regulation within the field preempted.

Similarly it is our belief that the Federal interest

and the need for national uniformity are so great

that enforcement of state regulation should be

precluded.

We remain convinced of the propriety and neces-

sity for the very broad preemption policy contained

in section 514. To the extent that the scheme of

regulation is found to be deficient with respect to

some or all of the plans covered by the Act, we are

prepared to consider amendments expanding or modi-

fying the federal standards. We will be most reluc-

tant to consider any remedy involving a limitation

on the preemptive scheme as it applies to the plans

23

described in section 3(3) of Title I. [H.R. Rep.

94-1785, 94th Cong. 2d Sess. 46-47, 48 (1977) ]

2. The legislative history just reviewed is instructive

in four regards.

First, that history shows that contrary to the Massa-

chusetts court’s conclusion, see p. 7 supra, Congress clearly

was intent on protecting “private decision-making” in

the structuring of employee benefit plans. The Senate

and House committee reports on the bills that became

ERISA both state, as a formative principle underlying

the Act, an intent to accommodate “the interests of em-

ployers and labor organizations in maintaining flexibility

in the design and operation of their pension programs.”

P. 16 supra; see also p. 14 supra (Secretary Schultz’s

testimony). Moreover, a principal reason the scope of

§ 514(a) was broadened by the conference committee was

precisely to preclude state regulation of “the form and

content of a legal service plan,” p. 19 supra (Sen. Javits),

and thus to assure “employers and unions the freedom to

develop and operate legal service plans of their choice,”

p. 19 supra (Sen. Williams).

Second, the legislative history likewise belies the Mas-

sachusetts court’s attempt to minimize Congress’ desire

to allow “interstate employers to maintain uniform plans.”

See p. 7 supra. Beginning with the very first preemption

proposal in 1970, the advocates of preemption consistently

stated this as their principal rationale, e.g., p. 15 supra

(Secretary Schultz) ; the 1973 Senate and House commit-

tee reports therefore state that, “[b]ecause of the inter-

state character of employee benefit plans, the Committee

believes it is essential to provide a uniform source of law

...’ p. 17, supra; and the 1977 House report reemphasizes

that “the Federal interest and the need for uniformity are

so great that enforcement of state regulation should be

precluded,” p. 22 supra.

Third, the legislative history—especially the explana-

tory statements following the conference report—estab-

24

lish that “Congress applied the principle of pre-emp-

tion ‘in its broadest sense to foreclose any non-Federal

regulation of employee benefit plans,’” and not just non-

Federal regulation that conflicts with ERISA’s rules.

Shaw v. Delta Air Lines, supra, 51 L.W. at 4972. Those

statements show with equal clarity that Congress viewed

the savings clause as “creating only very limited excep-

tions to pre-emption.” Id. See also p. 20 supra (Rep. Dent,

Sen. Williams).

Fourth and finally, the legislative history contains not

one iota of evidence to suggest that Congress intended to

create a regime which would discourage or effectively pre-

clude the use of insurance to fund employee benefits. To

the contrary, the legislative history shows that the “most

important purpose” of the Act is “to assure American

workers that they may look forward with anticipation to

a retirement with financial security and dignity,” and

that to do so the Act specifically seeks to assure “ade-

quate funding” of pensions lest “a promise of pension”

prove “illusory and empty.” S. Rep. 93-127, supra, at

11, 10; H.R. Rep. 93-533, supra, at 8, 7. Congress recog-

nized that one means of funtling employee benefits is

through the “purchase of insurance,” ERISA § 3(1), 29

U.S.C. §6 1002(1) (defining “employee welfare benefit

plan”), and insured plans were viewed as safer than self-

insured plans; the resulting preference for insurance is

manifest in the very structure of the Act.** Thus, by at-

16 For example, ERISA § 302, 29 U.S.C. § 1082, establishes

a complex set of minimum funding standards for pension plans,

but under § 301(a) (2), 29 U.S.C. § 1081(a) (2), this set of stand-

ards is generally inapplicable to plans funded exclusively by insur-

ance. Congress created this exemption because of the fact that

insured plans “have behind them the funding of the insurance com-

panies,” H.R. Rep. 98-779, 98rd Cong. 2d Sess. 24 (1974) (House

Ways and Means Committee) ; 2 Leg. Hist. 3316 (House Committee

on Education and Labor explanatory material), and thus Congress

concluded that such plans “will be properly funded,” 2 id. 3342.

For other examples of favored treatment of insured plans, see,

e.g., ERISA § 103(a) (C), 29 U.S.C. § 1023 (a) (C), 29 U.S.C. § 1023

25

tributing to Congress an intent to discourage the creation

or maintenance of insured plans, the decision below flies

in the face of Congress’ intent.

8. Given all this, there can be no doubt that, as the

Massachusetts court itself recognized, see pp. 6-7 supra,

the phrase “a law . . . which regulates insurance” cannot,

in the context of the savings clause, refer to all laws

which, in form, are addressed to insurers. As previously

noted, such an interpretation would leave the states free

to impose rules on insured benefit plans even with re-

spect to those matters that Congress itself regulated,

such as vesting requirements. See p. 7 supra. The leg-

islative history establishes that, as early as 1970, the

decision was made to establish uniform federal rules at

least with respect to those subjects being regulated by

ERISA; as the 1973 Senate committee report stated:

“Tijt is not intended . .. that the state agencies. . .

would formulate or apply substantive standards to plans

subject to this Act which differ from the standards in

this Act.” Pp. 17-18 supra. Thus, the phrase “law...

which regulates insurance’—which phrase appeared in

every major pre-ERISA bill from 1970 forward—must

refer to a class smaller than that consisting of all laws

addressed to insurers.

Equally clearly—and contrary to the decision below—

the savings clause cannot be read to permit all indirect

state regulation of insured benefit plans that does not con-

(a)(C) (exempting insured plans from certain auditing require-

ments); § 406(b) (1), 29 U.S.C. §1103(a) (insurance contracts,

unlike all other assets of a benefit plan, need not be held in trust).

It is noteworthy in this regard that ERISA distinguishes be-

tween true insurance and plans in which an insurance company

maintains a “separate account” for the premiums paid by the em-

ployer which account provides the sole source of money to fund

benefits for the employer’s employees. See ERISA §3(17), 29

U.S.C. § 1002(17). Generally speaking, separate account plans—

which are, in substance, a species of self-insurance—do not qualify

for the favored treatment afforded to insured plans.

26

flict with an express provision of ERISA. That interpre-

tation is inconsistent with the congressionai policies favor-

ing private autonomy in establishing benefit plans, na-

itonal uniformity in regulating such plans, and the pref-

erence for insurance to fund such plans. Congress cannot

be understood, in enacting what it saw as a “very limited”

exception to the “broad[]” preemption rule of § 514(a),

p. 24 supra, to have effectively nullified those critical

policies with respect to insured plans by authorizing state

regulation of the fundamental elements of such plans so

long as the state law is in the form of insurance regula-

tion.*®

The conclusion is thus inescapable that a “law...

which regulates insurance” within the meaning of the

savings clause is a law that both in form and in sub-

stance is addressed to the decisions or actions of insur-

ers. That is the meaning stated in the section-by-section

analysis of the Nixon administration bill in which a pre-

emption provision and the saving clauses were first devel-

oped and cojoined:

Section 18 designates the Act as the exclusive form

of regulation for employee benefit plans within the

areas covered, but provides that State laws which

otherwise regulate insurance . . . remain operative.

[P. 13 supra]

16In this regard, Alessi v. Raybestos-Manhattan, Inc., supra, is

instructive. At issue in that case was a state workers compensation

statute under which workers compensation benefits could not be

used to offset pension benefits. In holding that law preempted by

§ 514(a) the Court stated:

It is of no moment that New Jersey intrudes indirectly,

through a workers compensation law, rather than directly,

through a statute called “pension regulation.” ERISA makes

clear that even indirect state action bearing on private pension

plans may encroach upon the area of exclusive federal concern.

. . . ERISA’s authors clearly meant to preclude the States

from avoiding through form the substance of the preemption

provision. [451 U.S. at 525; emphasis added ]

27

That is likewise the meaning stated by the House re-

port issued in the Congress after ERISA was enacted

which says that the purpose of the “limited exceptions”

was “to avoid disrupting state efforts to regulate the

conduct of other financial entities not subject to the fed-

eral Act.” P. 22 supra. And that is the only interpre

tation, we submit, that makes sense of the statutory lan-

guage and that accords with Congress’ intent. Accord-

ingly, because the Massachusetts law at issue here con-

cerns the types of benefits to be provided by benefit plans

—a fundamental decision for private parties to make in

creating such plans—the statute is not a “law . . . which

regulates insurance” within the meaning of the savings

clause and hence is preempted by ERISA § 514(a).

CONCLUSION

For the foregoing reasons, the judgment of the Massa-

chusetts Supreme Court Judicia! should be reversed.

Respectfully submitted,

DAVID M. SILBERMAN

1000 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 833-9340

MARSHA BERZON

177 Post Street, Suite 700

San Francisco, CA 94108

(415) 421-7151

LAURENCE GOLD

(Counsel of Record)

815 16th Street, N.W.

Washington, D.C. 20006

(202) 637-5390