Usually you think of retirement plans when you consider fiduciary responsibility, recalling headline cases where plan fiduciaries were held liable for investment choices that harmed participants.
The Employee Retirement Income Security Act (ERISA) requires fiduciaries to act in the best interests of plan beneficiaries and it covers most employee benefit plans, not just retirement accounts.
The duties of the plan or trust fiduciary are simple:
- Loyalty to the beneficiaries.
- Prudence and the skill of a professional investor or trustee.
- Diversification of investments to minimize risk.
- Adherence to the rules set forth in plan documents and applicable law; plan documents must be brought into compliance if they conflict with legal requirements.
This level of professional care is quite high and can expose trustees and plan committees to significant exposure if they fail to follow it.
HIPAA established rules governing portability, nondiscrimination in enrollment and premiums, and the confidentiality of employee medical information.
More recent federal health-care reforms introduced new requirements and options for plan funding and employee coverage that fiduciaries must consider. Fiduciaries must absorb changes in law and integrate those changes into their cost‑benefit decisions without sacrificing prudence.
Questions include whether mandatory coverage affects preexisting cafeteria plan structures, whether opt-outs are permitted, and how coverage tied to a spouse’s employer might be impacted if that employment changes.
Have professionals review all plan documentation for flexibility and compliance, and give trustees clear procedures for decision making. Also review your insurance programs, including your Fiduciary (ERISA) Liability Insurance to confirm limits and exclusions.
Have other professionals check your directors and officers coverage and review your Fiduciary Liability Insurance so trustees understand any gaps in protection.
If you are unsure how to apply plan rules or insurance protections in the current environment, talk to an agent.
Frequently Asked Questions
What is a fiduciary under ERISA?
A fiduciary is someone who exercises discretionary control over plan management or assets or who gives investment advice for a fee, and must act in the beneficiaries' best interests.
Does HIPAA limit sharing employee medical information?
Yes. HIPAA restricts sharing of employees' protected health information and requires safeguards to protect confidentiality and limit disclosure.
Are plan fiduciaries personally liable for poor decisions?
Fiduciaries can be held accountable for breaches of duty if they act imprudently, fail to follow plan documents, or engage in prohibited transactions.
Should plan documents be updated after health-care law changes?
Yes. Plan documents should be reviewed and revised as needed to ensure they remain consistent with current law and administrative practices.