Request By:
Hon. Richard S. Holt
1400 Vine Center Tower
Post Office Box 1808
Lexington, Kentucky 40593
Opinion
Opinion By: Steven L. Beshear, Attorney General; Joe Johnson, Assistant Attorney General
In your letter to this office dated December 30, 1982, you requested an opinion whether ERISA preempts KRS §§ 304.32-300, 304.32-310 and 304.32-320 referred to collectively as the "Conversion Statutes." Your letter includes an impressive discussion of many federal authorities which you contend indicate preemption. However, this office is not able to concur with your conclusion that the statutes have been preempted by the federal law. This is because we simply cannot accept your basic starting premise that under the "Alessi Test" the Conversion Statutes are preempted because they "relate to" employee welfare benefit plans. Therefore, we are of the opinion that your cited cases are inapplicable.
Section 514 of ERISA (29 U.S.C.S. § 1144 (1982)) states as follows:
(a) . . . [T]he provisions of this title and title IV shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan described in Section 4(a) and not exempt under Section 4(b). . . . (Emphasis added).
A consideration of whether a state provision violates the Supremacy Clause of the United States Constitution starts with the basic assumption that Congress did not intend to displace state law.
Maryland v. Louisiana, 451 U.S. 725, 101 S. Ct. 2114, 68 L. Ed. 2d 576 (1981). In
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S. Ct. 1895, 68 L. Ed. 2d 402 (1981), the High Court was faced with conflicting federal and state law. The state law provided that workers' compensation benefits cannot be set off against employees' retirement pension benefits or payments while federal Treasury Department Regulations and Internal Revenue Service Rulings held that Employees' Retirement benefit payments must be integrated with workers' compensation awards for which the individual is eligible.
Whatever the purpose or purposes of the New Jersey statute, we conclude that it 'relate[s] to pension plans' governed by ERISA because it eliminates one method for calculating benefits -- integration -- that is permitted by federal law. 101 S. Ct. at 1907.
By contrast, federal law does not preclude the states from the inclusion of a conversion privilege and we cannot read Alessi as broadly as the interpretation which you have placed upon this decision. As that Court also stated:
[P]reemption of state law by federal statute or regulation is not favored in the absence of persuasive reasons -- either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained. 101 S. Ct. at 1905.
In fact, the Court expressly limited the application of its decision to the particular facts before it:
We need not determine the outer bounds of ERISA's pre-emptive language to find this New Jersey provision an impermissible intrusion on the federal regulatory scheme. 101 S. Ct. at 1907.
Therefore, any meaning which may attach to the term "relates to" as used in the Alessi decision, must be restricted to the facts of that case or factually similar cases which may subsequently arise. However, as noted above, the legal problem presented in your letter differs substantially from the Alessi case. Unlike Alessi wherein federal law mandated integration of benefits, federal law does not prohibit the states from including a conversion privilege. There is no conflict between ERISA and the Kentucky Statutes and we cannot read Alessi so broadly as to constitute preemption.
The Alessi Court had the opportunity to give a broadsweeping meaning to the term "relates to" but chose not to do so. We conclude that the conversion statutes have not been preempted by federal law.