## Facts

- Maryland enacted the Fair Share Health Care Fund Act requiring non-governmental employers with 10,000+ employees in Maryland to spend at least 8% of Maryland payroll on employee “health insurance costs” or pay the shortfall to the state.
- Only a few employers met the threshold; as applied, the statute principally affected Wal-Mart, a large employer with about 16,000 Maryland employees.
- Wal-Mart sponsored an ERISA-covered employee health benefit plan.
- Retail Industry Leaders Association (RILA), a trade association including Wal-Mart, challenged the Act, alleging it effectively forced covered employers to increase ERISA-plan benefit spending or incur a substantial state assessment.

## Issues

1. Whether the Act “relates to” ERISA-covered employee benefit plans and is therefore preempted by ERISA § 514(a).
2. Whether offering a “pay shortfall” alternative avoids preemption when the statute’s economic consequences leave covered employers no reasonable alternative but to modify ERISA plan spending.

## Decision

- The Fourth Circuit affirmed summary judgment for RILA and upheld an injunction barring enforcement of the Act.
- The court held the Act was preempted by ERISA because it had an impermissible “connection with” ERISA plans.
- Although framed as a choice between increased benefits spending and a state payment, the court concluded the statute operated as economic coercion that effectively compelled covered employers to increase contributions to their ERISA health plans.
- The court reasoned the Act interfered with ERISA’s objective of nationally uniform plan administration by inviting inconsistent state-by-state benefit spending mandates.

## Legal Principles

- ERISA § 514(a) preempts state laws that “relate to” employee benefit plans, including laws with a prohibited “connection with” such plans.
- A state law has a prohibited connection with ERISA plans when it effectively mandates plan structure, administration, or funding levels, even if it does not prescribe specific plan terms on its face.
- A nominal “pay-or-play” option does not defeat preemption where the statutory design makes the payment option impractical and functions as a penalty that pressures ERISA plan redesign.
- State measures that condition liability on ERISA-plan health benefit expenditures risk undermining ERISA’s goal of uniform nationwide regulation of employee benefit plan design and administration.

## Conclusion

The Fourth Circuit concluded Maryland’s Fair Share Health Care Fund Act was ERISA-preempted because, in practical operation, it left covered employers little real choice but to raise ERISA-plan health spending to meet the state threshold, thereby intruding on federally regulated plan design and threatening nonuniform, state-driven benefit mandates.


Retail Indus. Leaders Ass'n v. Fielder, 475 F.3d 180 (4th Cir. 2007)