PLANSPONSOR - April - May 2022 - 38

FIDUCIARY FORUM
Creating Health and
Wealth Committees
ERISA governs more than just retirement plans
W
e write often about fiduciary responsibilities and
retirement plans; in doing so, we focus mostly on
401(k) and 403(b) plans. That's to be expected, given
the ever-increasing number of retirement plan fee litigation
cases and issues related to fees. But there's more to life than
retirement plans. Let's not forget that welfare plans also are
subject to fulfilling Employee Retirement
Income Security Act fiduciary duties, along
with a number of compliance requirements.
Further, welfare plans and fiduciaries have
also been subject to litigation concerning
the same types of issues.
Fees
paid to service
providers
for
pays for services are reasonable.
Besides monitoring fees and services provided, sponsors
... it would serve
welfare plan
fiduciaries
welfare plans must be reasonable, and the
fiduciaries of these plans have an ongoing
duty with respect to selecting and monitoring
the service providers, including, for
example, brokers, insurers and third-party
administrators for self-funded welfare plans.
The Department of Labor often considers issues concerning fees
and fiduciary roles when it does investigations and even brought
a lawsuit alleging fiduciary breaches in the welfare plan context.
In that case, the secretary of Labor sued health plan fiduciaries,
challenging the reasonableness of health plan fees. The defendants
successfully defended the case when the evidence established
that the health plan fiduciaries had effectively exercised
fiduciary responsibilities in monitoring service providers, negotiating
fees, reviewing claims administrators' operations, etc.
As required under the Consolidated Appropriations Act,
certain welfare plan service providers must supply the plan's
fiduciaries with fee and service disclosures similar to those that
retirement plan service providers must supply under ERISA
Regulation 408b-2. The purpose of providing that information
is to help the plan fiduciaries determine whether the fees are
reasonable relative to the services received.
We discussed these disclosure requirements in more
detail in a prior column but thought it was time for a reminder
regarding welfare plan fiduciary governance. As the DOL and
participants become more focused on fees, it would serve welfare
plan fiduciaries well to look to retirement plan procedures and
implement similar monitoring practices, including periodic
requests for proposals to help assess whether the fees the plan
38 PLANSPONSOR.COM April - May 2022
Art by Joseph Ciardiello
well to look to
retirement plan
procedures ...
should be aware of the many compliance obligations that welfare
plans face, especially as the number of these obligations continues
to rise. We have all been addressing COBRA, HIPAA-less
commonly known as the Consolidated Omnibus Reconciliation
Act of 1985 and the Health Insurance
Portability and Accountability Act of 1996-
and even health reform for years, but now we
also must consider new transparency-related
rules as well as expanded mental health
parity requirements. These changes will
affect claim processing procedures as well as
participant communications.
Having a governance structure in the
welfare plan context can help ensure these
compliance and ERISA fiduciary responsibilities
are satisfied. While there's no requirement
to form a committee to handle such
monitoring, we see more employers forming committees like
their retirement plan committee or one that handles both retirement
and welfare plan matters.
There are several benefits to forming a health and welfare
committee. As a starting point, one of the best defenses to an ERISA
fiduciary lawsuit is having established and followed a thoughtful
decision-making process. Forming a welfare committee that
meets regularly creates an easy way to document the fiduciary
process through an agenda, minutes or other meeting materials.
When the committee members receive periodic fiduciary training
at the meetings, they more fully understand their duties and are
better positioned to satisfy their obligations.
As welfare plan requirements become more complex and
health-care costs climb, it becomes increasingly important to make
sure the plan fiduciaries effectively oversee their plan. Forming a
welfare plan committee that works with human resources, counsel
and consultants to monitor any issues and document the prudent
process involved in making plan decisions, may help form another
line of defense as welfare plan litigation increases.
Summer Conley is a partner in the Los Angeles office of Faegre
Drinker Biddle & Reath LLP. Michael Rosenbaum is a partner
in the firm's Chicago office.
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