Fiduciary Legal Compliance: Avoiding Costly Fiduciary Breach Lawsuits

November 11, 2019
Hall Benefits Law, LLC

This blog is an excerpt of Anne Tyler Hall’s book “Case Studies in ERISA: Why It Matters And How It Benefits You, A Plan Sponsor’s Guide To Employee Benefits Legal Compliance”  request your free digital copy of the book here.

More than 6,300 class-action lawsuits were filed under ERISA in 2018. For 2016 and 2017, the top ten ERISA settlements were $807.4 million and $927.8 million, respectively, and the top ten ERISA settlements totaled $313.4 million in 2018, for a three-year total of more than $2 billion. In 2017, ERISA settlements were nearly twice the amount of the total wage and hour claims and totaled far more than any other area of employment law. Fiduciary breach lawsuits affect both small and large plans. During 2017, an excessive fee claim involved a retirement plan with only $3 million in plan assets and less than 20 participants.10 In recent years, the largest ERISA settlements involved disputes over so-called church plans, breaches of fiduciary duty, general claims of retirement asset mismanagement, and failures to adequately fund pension plans. Plaintiffs’ attorneys continue to search for unwary retirement plan fiduciaries to sue. It is estimated that costs for a company to defend a fiduciary breach claim range from $500,000 to $750,000 but can be as expensive as $5 million (or more).

 

Fiduciary Litigation Expands to Health Plans

Retirement-focused fiduciary breach lawsuits have proven lucrative. While plaintiffs’ attorneys continue to target complacent fiduciaries of retirement plans, they have also discovered an opening for fiduciary breach litigation against employer-sponsored health and welfare plans. With rapidly rising health care costs, more companies are collecting cost-sharing premiums from employees or becoming self-insured. This recent development has created a new target for ERISA fiduciary breach actions against unwary company health plan fiduciaries.

Plaintiffs’ attorneys are now contending that employee premiums and pharmacy rebates are ERISA plan assets. Therefore, every decision regarding premiums and rebates is a fiduciary decision. If a health plan fiduciary is not carefully monitoring co-pays, types of coverage, pharmacy benefits, and premiums, he may have committed a fiduciary breach under theories developed pursuant to retirement plan litigation. The recent class action against health plan fiduciaries highlights the importance of establishing and documenting prudent fiduciary processes for making decisions not only on behalf of retirement plans, but also on behalf of health and welfare plans.

The following two tabs change content below.

Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

Latest posts by Hall Benefits Law, LLC (see all)