Are state laws regarding withholding preempted by ERISA? I understand that New York State does not permit withholding without consent, which precludes the option of selecting the negative election option in a NYS 401(k) plan. Has anyone challenged this, or does it even need challenging if ERISA preempts the state law?

I believe the popular belief is that ERISA preempts state wage withholding laws to the extent that those laws relate to an employee benefit plan. There has been some discussion as to whether a prohibition against negative elections is contrary to ERISA, and if not, whether it is sufficiently related to the plan as to require preemption. That is, negative elections are not "necessary" to an ERISA plan (as it can operate just fine with affirmative consent), but I haven't heard of any cases where the matter has been decided. I had heard that there were cases pending in NY, CA and AZ on this point - but have lost track. Anyone have any update?

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