NEWS RELEASE

March 31, 2008
PR-08/06
For additional information:
Jason Hammersla
202-289-6700


Council emphasizes importance of ERISA, urges court to strike down San Francisco law

WASHINGTON, D.C. — In an amicus (friend of the court) brief filed with the U.S. Court of Appeals for the 9th Circuit on March 28, the American Benefits Council asserted the importance of the Employee Retirement Income Security Act's (ERISA) preemption standard in helping maintain employer sponsorship of health plans and contain plan costs. The Council's brief supports the Golden Gate Restaurant Association in a legal challenge to an employer health spending requirement mandated by the San Francisco Health Care Security Ordinance.

"We all share the same goal of achieving high-quality, reasonably priced health care for as many people as possible," Council President James A. Klein said. "However, reform efforts that affect employers must build on the established federal framework which preserves uniformity in plan design and administration. A patchwork solution based on numerous state and local initiatives will simply be unmanageable for multi-state employers."

The ordinance, which became effective January 9, 2008, requires medium and large businesses to make minimum health care expenditures on behalf of covered workers. The ordinance set out a non-exclusive list of "qualifying" health care expenditures, such as contributions to HSAs, direct reimbursement to employees for health care expenses, payments to third parties for providing health care services, costs incurred for the direct delivery of health care services, or quarterly payments to the city "to be used on behalf of covered employees." The ordinance also requires employers to maintain records and proof of health care expenditures, to allow city officials "reasonable access" to such records and annually report "such other information" that the city requires. On December 26, 2007, the U.S. District Court for the Northern District of California ruled in favor of the Restaurant Association, holding that the ordinance had an impermissible connection with ERISA plans. However, a three judge panel of the U.S. Court of Appeals for the Ninth Circuit subsequently placed a hold on the district court's decision, permitting the San Francisco health care ordinance to go into effect at least until the court could consider an appeal later this month.

"This ordinance will obviously have a detrimental impact on employers' ability to uniformly administer multi-state health plans," Klein said. "Regardless of how an employer attempts to comply with the ordinance, whether through adding or establishing health benefits or making a payment to the city, the law forces employers to make certain choices that result in modification or establishment of an employee benefit plan – exactly the sort of state or local regulation ERISA was intended to preempt."

Klein concluded, "We urge the U.S. Court of Appeals for the 9th Circuit to strike down San Francisco's ordinance since it clearly violates the fundamental principles of established law. Employer plan sponsors can only carry out our shared health care goals by operating within the framework provided by ERISA."

To arrange an interview with a Council staff member, please contact Jason Hammersla, Council director, communications, at jhammersla@abcstaff.org or by phone at (202) 289-6700.

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The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.