The Employee Retirement Income Security Act (“ERISA”) imposes fiduciary responsibilities on health plan sponsors, employers, and other plan trustees with regard to fees and agreements with service providers and vendors. While health and welfare plans often routinely collect, hold and release more money than retirement plans almost all the attention from employers, governmental regulators and plaintiff lawyers favor retirement plans and their service providers when focusing on fiduciary rules and procedures.
The Consolidated Appropriations Act of 2021, effective January 1, 2022, detailed vendor compensation disclosure requirements applicable to group health plans. Employers are required to use these disclosures to ensure that their health plan pays no more than reasonable compensation to its service providers and has specific contracts with detailed terms and expectations.
If someone is considered a health plan fiduciary under the Department of Labor’s (DOL’s) rules, that person owes duties to participants and beneficiaries. Those duties include:
- To act solely in the interests of plan participants and beneficiaries. (the “duty of undivided loyalty.”)
- To act for the exclusive purpose of providing health and welfare benefits and paying reasonable plan expenses. (the “exclusive benefit rule.”)
- To act with the care, skill, prudence, and diligence under the circumstances that a prudent person acting in that capacity, and familiar with such matters, would. (the “prudent expert” rule.)
- To follow the terms of the plan documents and other instruments governing the plan if they are consistent with the law.
- To avoid prohibited transactions.
ERISA may impose personal liability on anyone serving in a fiduciary capacity that violates these rules. Therefore, being a health care plan fiduciary is something that should be seriously considered.
In our next newsletter, these 5 fiduciary duties as they apply to health and welfare plans will be further described.
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