Can employee benefits be offered on the same basis for employees in different states?


Your company, which has employees in 16 states, would like to establish a uniform employee benefits package that covers its entire U.S. workforce. You have one 401(k) retirement plan that is available to all employees on the same terms. Can you offer fringe benefits, such as paid vacation and sick time, on the same basis for all U.S. employees?


It depends. Certain benefits, such as a 401(k) plan, are subject to the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that preempts similar state law and allows for the uniform administration of ERISA benefit plans regardless of state law. If the company has a paid-time-off plan that is subject to ERISA, state law would generally be preempted. However, a program that provides employees with paid-time-off benefits that are paid from the employer's general assets generally is not subject to ERISA. There are other exceptions for certain funded and collectively bargained paid-time-off arrangements.

If the company's paid vacation and sick time program is not subject to ERISA, which is typically the case, the program will instead be governed by applicable state and local law. The company will need to comply with the laws in each of the 16 states in which there are employees as well as any local laws that may apply. Because the company's goal is to offer uniform benefits to the entire U.S. workforce, as long as none of the applicable laws governing paid vacation and sick time conflict with one another, it is possible to achieve this goal by creating a uniform policy that complies with the laws of each applicable jurisdiction. For example, if one of the 16 states prohibits "use it or lose it" vacation policies, the uniform vacation policy can be structured so that no employee in any state would lose unused vacation.

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