‘Generally applicable criminal law’: ERISA’s little-known exception to preemption and its impact in a post-Roe world

August 26, 2022 – Following the Supreme Court’s recent decision to overturn Roe v. Wade, state legislatures have begun passing new laws directed at those who obtain and provide abortion services, as well as at those who assist them. Some states’ laws impose criminal liability, and more may soon follow. And, of course, all states have criminal laws prohibiting homicide that could be employed by zealous prosecutors where state law supports fetal personhood.

Employer benefit plans and their sponsors and administrators need to understand the risks of potential criminal liability for themselves and their employees if they offer benefits for abortion services and abortion-related travel. While the Employee Retirement Income Security Act of 1974 (ERISA) generally preempts state laws that would seek to prohibit self-funded benefit plans from offering abortion-related coverage, ERISA will not necessarily prevent states from prosecuting plans, sponsors, administrators and their employees in all instances.

A. ERISA preemption and its exception

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ERISA broadly preempts “any and all State laws insofar as they may not or hereafter relate to any employee benefit plan.” (29 U.S.C. § 1144(a)). However, section (b)(4) of ERISA’s preemption provision says that subsection (a) “shall not apply to any generally applicable criminal law of a State.” (29 U.S.C. § 1144(b)(4) (emphasis added)). ERISA does not define “generally applicable criminal law,’ and there is almost no legislative history and very little case law interpreting this language.

Accordingly, the plain language of the statute could give states a way to prosecute plans, sponsors and administrators who allegedly assist women in obtaining abortions, either by offering coverage and benefits or by other means.

Consider the following hypothetical: State X criminalizes the sale or use of mail-order medication abortion pills, and also makes it a crime with severe penalties to aid or abet a person in obtaining such medication. This would be a generally applicable criminal law, in that it broadly applies to all persons in the state.

If a plan covers the medication or a telemedicine appointment during which the medication is prescribed, could that be aiding and abetting under the statute? If so, would the statute be preempted by ERISA as applied to the plan?

The legislative history, regulatory guidance, and case law concerning the “generally applicable criminal law” clause do not offer definitive answers. If anything, they tend to suggest that a state may be able to impose and enforce criminal sanctions against ERISA benefit plans and their administrators under some circumstances.

B. Legislative history

During the April 1974 Conference Committee regarding the bill that became ERISA, a proposed major preemption exclusion for laws affecting the rights of participants or beneficiaries to recover plan benefits was replaced by a narrow exclusion limited to “generally applicable criminal law.” During the House Debate, Senator Jacob Javits was the only person to mention the generally applicable statute:

“In view of Federal preemption, State laws compelling disclosure from private welfare or pension plans, imposing fiduciary requirements on such plans, imposing criminal penalties on failure to contribute to plans — unless a criminal statute of general application — establishing State termination insurance programs, et cetera, will be superseded. It is also intended that a body of Federal substantive law will be developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans.” (120 Cong. Rec. 29942 (1974)).

Senator Javits’ comments imply that Congress at least intended to permit states to apply criminal laws imposing penalties on employers for failing to make plan contributions. However, Senator Javits was not directly speaking about the “generally applicable criminal law” exclusion, and therefore was not offering a comprehensive statement about its intended scope.

C. Regulatory guidance

The U.S. Department of Labor (DOL) has not dealt extensively with the “generally applicable criminal laws” clause, but its guidance suggests that states have the ability to enforce criminal laws against plans and administrators, so long as such laws do not specifically target plans. For example, the DOL opined that a Massachusetts law that imposed fines and penalties was preempted by ERISA because it specifically applied only to welfare and pension plans, whereas a state law criminalizing grand larceny would not be preempted as applied to pension trustees.

By contrast, a Colorado criminal law prohibiting usury was found to be a “generally applicable criminal law,” and thus was not preempted by ERISA as applied to a plan, because the law generally applied to any person in the state. (“Since the proscriptions of the Consumer Credit Code at issue are not intended to apply specifically to an activity related to employee benefit plans, we believe that the section 514(b) exception to preemption should apply.”).

D. The courts

To the extent that courts have dealt with section 1144(b)(4), they have not been particularly helpful in defining its scope. Few courts have performed an in-depth analysis. The courts’ prevailing view, similar to the DOL’s, is that “generally applicable criminal laws” are those that apply to all persons in the state, such as laws against larceny and embezzlement, and that a law that purports to specifically impose criminal sanctions on an employee benefit plan or its administrator is not a “generally applicable” criminal law. (See, e.g., Sforza v. Kenco Constructional Cont., Inc., 1986; Trs. of Sheet Metal Workers’ Int’l Ass’n Prod. Workers’ Welfare Fund v. Aberdeen Blower & Sheet Metal Workers, Inc., 1983; Baker v. Caravan Moving Corp 1983; and Commonwealth v. Federico, 1981).

A minority view endorsed by a few courts (mainly in New York) takes an even broader view of “generally applicable” to mean a criminal law that extends to the entire state and embraces all persons or things of a particular class, such as employers. (Goldstein v. Mangano 1978; Sasso v. Vachris 1982; National Metalcrafters v. McNeil 1985). Notably, almost all of these decisions are old, dating from the decade immediately after ERISA was enacted in 1974.

These decisions also tend to feel like an echo chamber, where each successive decision repeats the same rationale as prior decisions, without substantive analysis and without referring to any legislative history or regulatory guidance. This effect has resulted in some statements about section 1144(b)(4) that could be read to limit its scope but are not ultimately based on compelling authority.

For example, a line of courts that includes the 9th U.S. Circuit Court of Appeals — the only federal appellate court to address section 1144(b)(4) — has suggested the provision may be limited to laws like those prohibiting larceny and embezzlement. (Aloha Airlines v. Ahue 1993 (“We conclude, as did the district court, that “the better and prevailing view is that Congress intended the words ‘generally applicable’ to refer to criminal laws that apply to general conduct like larceny and embezzlement.”); Walker v. Cigna Ins. Grp 2000; Mitchell Energy & Dev. Corp. v. Fain 2001; Sforza; Commonwealth v. Federico 1981; and Trs. of Sheet Metal Workers’ 1983).

These decisions do not go so far as to say that only larceny and embezzlement laws are free from preemption, but to the extent that they imply that a law must criminalize something similar to larceny or embezzlement in order for section 1144(b)(4) to apply, nothing in the statute, its legislative history, or regulatory guidance compels or even supports such a reading.

In sum, the case law does not suggest any well-supported limitations on section 1144(b)(4)’s scope, other than that the criminal law must generally apply to all persons in order to fall within that scope.

E. Conclusion

In the absence of definitive guidance from Congress, the DOL, or the courts on the scope of section 1144(b)(4)’s exception from preemption for “generally applicable criminal laws,” a court determining whether a state law criminalizing aiding and abetting activities relating to abortion is preempted will largely be in uncharted territory. If the court’s lodestar is the plain text of section 1144(b)(4), and the law is not specifically directed at benefit plans or their administrators, it seems quite possible that the court will find that the law is not preempted by ERISA.

Coming back to our hypothetical, it is entirely possible that a plan or administrator (or their employees) that covers abortion medication or telemedicine used to obtain it could be charged with aiding and abetting a criminal offense and be unable to rely on ERISA preemption.

Given these risks, plans and their administrators should proceed with due caution, keep up to date on all relevant state laws, and consider whether or not new criminal laws focused on abortion could be generally applicable criminal laws that might apply to them or their employees. They should also explore ways to potentially mitigate risk, including improving oversight, to ensure they do not cover abortion-related services that could be considered to be illegal and evaluating the extent to which they or their employees could be found to be within the jurisdiction of a state with potentially applicable criminal laws.

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