Who Is a Fiduciary for a Self-Funded Healthcare Plan?
“Many of the actions involved in operating a plan make the person or entity performing them a fiduciary. A person using discretion in administering and managing a plan or controlling the plan’s assets is a fiduciary to the extent of that discretion or control. Thus, fiduciary status is based on the functions performed for the plan, not just a person’s title.”
“Anyone who has discretionary authority over the administration of the plan is a fiduciary obligated under ERISA to the fiduciary obligations of Part 4. This includes an employer and its officers and employees, or committees acting in such a capacity.”
According to the U.S. Department of Labor, Employee Benefits Security Administration, if you are involved in the decision making process for your organization’s self-funded healthcare plan you are likely a fiduciary. We hope you find this EBSA PDF valuable.
Download EBSA PDF
Authored by Charles Humphrey Founder and principal of the Humphrey benefits law firm, with over 30 years concentrated practice in the area of ERISA and employee benefits.
The fiduciary responsibility provisions of the Employee Retirement Income Security Act (ERISA) are familiar to employers particularly in the context of their 401(k) plans, as knowledge of the responsibility has been widely disseminated in recent years. In broad brush these provisions require employers to act with due care, to act for the exclusive benefit of plan participants and beneficiaries, and to pay only reasonable and necessary expenses. Significant components of these responsibilities are the duty to monitor and oversee plan activities and to take appropriate actions when warranted for the benefit of plan participants. Not so widely known is that the same responsibilities and duties apply to self-insured group health plans.
The Employee Retirement Income Security Act (ERISA) protects your plan’s assets by requiring that those persons or entities who exercise discretionary control or authority over plan management or plan assets, anyone with discretionary authority or responsibility for the administration of a plan, or anyone who provides investment advice to a plan for compensation or has any authority or responsibility to do so are subject to fiduciary responsibilities. Plan fiduciaries include, for example, plan trustees, plan administrators, and members of a plan’s investment committee.
The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Fiduciaries must act prudently and must diversify the plan’s investments in order to minimize the risk of large losses. In addition, they must follow the terms of plan documents to the extent that the plan terms are consistent with ERISA. They also must avoid conflicts of interest. In other words, they may not engage in transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, services providers or the plan sponsor.
Fiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of plan assets. Courts may take whatever action is appropriate against fiduciaries who breach their duties under ERISA including their removal.
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