More Mandated Benefits? Stop! Think!


 More Mandated Benefits? Stop! Think!

ERISA regulates and mandates a system that is, above everything else, voluntary. In my view, mandates have no place in it, not because they are not good objectives, but because they are not voluntary, not free, and inevitably counter-productive.

Why not mandate? Because mandates undermine the voluntary market - a market that produces for the employees of most participating employers a package of benefits that is better than anything a government could or would mandate . The voluntary market is not universal (like Social Security or Medicare). It is a result of business decisions to provide these benefits because they are good business. Universal mandates (for example, so-called “Mandatory Universal Pensions” or “MUPs”) are always just a devious way of making private employers pay for a safety net that should be paid by taxes. A mandate will always be minimal, like the minimum wage, because it is a national, universal, rock-bottom benefit. That is not what private employee benefits are about.

Why not mandate at the state level (like Maryland’s Pay or Play)? Same reason, only worse: It’s not even a universal mandate. It’s still ultra-minimal. And it guts the private employee benefit system’s cornerstone – federal preemption. It just balkanizes the system.

But why not abandon federal preemption? Take a look at 14(b) of the National Labor Relations Act (the so-called “right to work” provision). The supporters of non-preemption are, these days, at the liberal end of the political spectrum – and there they are supporting the same theory as “right to work” laws (which they have always opposed). Those who ignore past experience are condemned, of course, to repeat it.

Once that preemption door is opened, what, inevitably, also comes through it? How about these: Each new unpreempted state law will come with a new unpreempted state remedy (without which, of course, the state law is meaningless). And that state remedy – bet on it – will come with compensatory and punitive damages – the very thing that ERISA preemption sought to head off.

What’s wrong with that? If you don’t know, you won’t care, but it’s the death knell of the ingenuity and further development of the private voluntary system. It just converts the floor into a ceiling.

The moral to the story? If you want to pass a federal benefits law (“National Health” for example), OK. Go for it. But do it as a governmental benefit with governmental financing and governmental control. Don’t pretend it is or should be part of the private voluntary ERISA system. In the private system, it’s pure poison.