Everyone focuses on 401(k) plans when we talk ERISA’s fiduciary rules. After all, what could be sexier than a 401(k) plan, right? But employers and their executives are fiduciaries of their welfare benefit plans too. A U.S. Department complaint filed in December against a welfare benefit plan sponsor reminds of that.
In the complaint the Department seeks recoupment from the employer and its executives of nearly $500,000 and the removal of fiduciaries of the company’s self-insured health benefit, dental, and flexible benefit plans. Each of these plans is a welfare benefit plan under ERISA and is within its regulatory scheme.
That scheme and its requirements are essentially the same as those that apply to 401(k) plans and will sound familiar to you if you are a 401(k) plan sponsor. Plan fiduciaries must:
- Act for the exclusive benefit and solely in the interests of plan participants
- Follow the terms of plan document
- Follow prudent processes in decision making/ subject to “prudent expert” standard
- Avoid engaging in acts of self-dealing
- Not act on behalf of parties whose interests are adverse to those of the plan.
- Follow appropriate written claims procedures.
The list goes on and in addition includes maintaining a plan document and summary plan description. (No — insurance company provided agreements and certificates of coverage do not satisfy these ERISA plan documentation requirements.)
Employers who sponsor welfare benefit plans have two jobs. They must seek to understand these rules, just as they would with their 401(k) plans. And they must put in place and follow a fiduciary governance or oversight structure that runs effectively and compliantly the plan.
Nothing puts a sharper point on the fiduciary nature of the employer’s obligations this than the complaint’s prayer for relief. It seeks the appointment of “an independent fiduciary for the proper administration of the plan.” (Emphasis added.)
