50 Years of ERISA-Protected Benefits

By Mia McCord

In 1963, the Indiana-based automobile company Studebaker abruptly closed its South Bend plant, leaving thousands of employees without their promised pensions. The company's financial woes meant that about 4,000 workers received cash settlements worth only 15 percent of their pension benefits, and another 2,900 received nothing. This tragic event highlighted a critical need for federal regulation to protect employees' retirement and health benefits.

In response, Congress enacted the Employee Retirement Income Security Act (ERISA) in 1974. As we mark its 50th anniversary in 2024, it is crucial to recognize ERISA's role in safeguarding the benefits of millions of American workers. ERISA ensures that private sector employees with pensions, 401(k) plans, and health and pharmacy benefits receive what they have been promised. It mandates transparency and provides robust enforcement mechanisms to protect these benefits from mismanagement and fraud.

ERISA's significance extends beyond protecting employees. It also benefits employers by creating a uniform standard across all 50 states, enabling businesses to offer consistent benefits to employees regardless of their location. This uniformity is essential for companies operating in multiple states, preventing the chaos and expense of complying with a patchwork of state regulations.

However, recent years have seen a disturbing trend where state lawmakers attempt to override or circumvent ERISA. One notable example is Oklahoma’s so-called “Patient Right to Pharmacy Choice Act,” which sought to dismantle employer-provided pharmacy benefits that steer employees towards more affordable options. The law was a transparent attempt to benefit independent pharmacies – a narrow special interest group, no matter how sympathetic – at the expense of consumers who had discovered they could find more affordable prescription options delivered to their home or at chain pharmacies. 

Fortunately, the Oklahoma law was struck down by a 10th Circuit Court, that correctly noted it was an attempt by state lawmakers to override federal statute. Unfortunately, states like Texas have ignored that ruling and attempted to pass their own copycat legislation, specifically House Bill 2021 and Senate Bill 1137. These bills, like the Oklahoma law, do not pass constitutional muster and will certainly drive-up health care costs.

Knee-capping the tools that employers use to reduce prescription drug and healthcare costs has real consequences for our state. Texas now spends more on prescription drugs than anywhere else in the country. In the last decade, drug prices have increased 159. According to our survey research conducted by Texas pollster Baselice & Associates, 26% of Texans report skipping doses on their medication or discontinuing it altogether because of cost. 

Meanwhile, Texas lawmakers – happy to campaign on principles like “small government” and “free enterprise” have passed more healthcare mandates than all but two other states. We are now a national leader when it comes to expensive red tape in healthcare.  

Should Texas lawmakers choose to champion legislation similar to HB 2021 and SB 1137, it is bound to be struck down by the courts, as Oklahoma’s was. But it is worth asking – why are Texas families and businesses saddled with these high costs and expensive mandates to begin with? Who is benefiting from these mandates, if it is not working Texans?

ERISA has created a reliable federal regulatory structure that ensures working families get the benefits they have been promised and that businesses don’t have to deal with a mismatch of state laws governing health insurance, prescription drug benefits and 401Ks. Texas state lawmakers should stop trying to unravel that system, especially since they are harming working families and our economy in the process.