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Brown & Brown — ERISA: General Fiduciary Duties, Plan Assets and MLR Rebates webinar (April 2025)
45 slides from Brown & Brown's conference presentation, April 2025
Slide 1: This Webinar Will Start Momentarily
This Webinar Will Start Momentarily. Thank you for joining us.
Slide 2: ERISA: General Fiduciary Duties, Plan Assets and MLR Rebates
ERISA: General Fiduciary Duties, Plan Assets and MLR Rebates Presented By: Brittany Botterill and Matt Gerard, Regulatory and Legislative Strategy Group Brown & Brown Insurance Services, Inc.
Slide 3: Disclaimer
DISCLAIMER Brown & Brown, Inc. and all its affiliates, do not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this document is intended to provide a general overview o
Slide 4: Presentation Agenda
Presentation Agenda 1 Overview 6 Examples of Fiduciary Duties – Health Plans 2 Plans Subject to ERISA 7 Recent Case Law 3 ERISA Plan Fiduciaries 8 Enforcement Plan Governance 4 ERISA Fiduciary Duties 9 and Best Practices 5 Prohibited Transactions BROW N & BROW N | 4
Slide 5: Overview
Overview
Slide 6: DOL's View
DOL’s View The Employee Retirement Income Security Act (ERISA) sets standards of conduct for those who manage employee benefit plans and their assets, called fiduciaries. Administering an ERISA plan and managing its assets requires certain actions and involves specific responsibilities. Fiduciaries,
Slide 7: Why is This Important?
Why is This Important? Increased agency focus on group health plans • Historically, agencies have been focused on retirement plan fiduciaries • Recent uptick in DOL focus on group health plans and fiduciary compliance Transparency laws and increase in ERISA class action lawsuits • Increase in transp
Slide 8: Plans Subject to ERISA
Plans Subject to ERISA
Slide 9: ERISA Plans
ERISA Plans All employee welfare benefit plans of private employers (both for-profit and not-for-profit) are subject to ERISA. There are two kinds of welfare benefit plans exempt from ERISA: 1 Church Plans 2 Governmental Plans BROW N & BROW N | 9
Slide 10: ERISA Plan Fiduciaries
ERISA Plan Fiduciaries
Slide 11: Who is an ERISA fiduciary?
Who is an ERISA fiduciary? A U T O M AT I C , D E L E G AT E D A N D F U N C T I O N A L F I D U C I A R I E S Automatic Fiduciaries Delegated Fiduciaries • Plan administrator (ERISA § 3(16)) • A named fiduciary may delegate fiduciary functions to another party » the person/entity designated as the
Slide 12: Who is an ERISA fiduciary?
Who is an ERISA fiduciary? A U T O M AT I C , D E L E G AT E D A N D F U N C T I O N A L F I D U C I A R I E S Functional fiduciaries (ERISA § 3(21)) • Person/entity that exercises any discretionary authority or discretionary control with respect to the management of the plan • Person/entity that ex
Slide 13: Identifying Plan Fiduciary
Identifying Plan Fiduciary Plan sponsor may be a plan fiduciary? Who is not a plan fiduciary? • If it serves as plan administrator, trustee, or • Accountants, attorneys, consultants, and named fiduciary actuaries acting solely in their professional capacities • Could also be a functional fiduciary •
Slide 14: Non-Fiduciary Functions
Non-Fiduciary Functions MINISTERIAL AND SETTLOR FUNCTIONS Performing ministerial or settlor functions does not render someone a fiduciary Ministerial Functions • Person who performs ministerial functions within a framework of policies, interpretations, rules, practices and procedures made by other p
Slide 15: Ministerial and Settlor Functions
Ministerial and Settlor Functions Examples of contrasting ministerial functions with functional fiduciary status • A third-party administrator (TPA) tasked with processing enrollment for a group health plan might encounter a situation where an employee’s status is unclear—such as a part-time worker
Slide 16: Ministerial and Settlor Functions
Ministerial and Settlor Functions Settlor Functions • Actions that relate to the formation rather than management of the plan • When making these decisions, an employer is acting on behalf of its business, not the plan; therefore, the employer is not a fiduciary • Examples: » Establishing a plan » C
Slide 17: ERISA Fiduciary Duties
ERISA Fiduciary Duties Td
Slide 18: Fiduciary Duties
Fiduciary Duties Duty of undivided loyalty • Manage the plan solely in the interest of participants and beneficiaries » This duty should also guide the handling of participant/beneficiary data ‒ This data has value, and fiduciaries should take steps to prevent its misuse • Avoid conflicts of interes
Slide 19: Fiduciary Duties
Fiduciary Duties Duty to administer plan in accordance with its terms • ERISA requires that the plan be maintained pursuant to a written document (i.e., plan document) • The plan document should include certain information (e.g., named fiduciary, eligibility, claims procedures, ability to amend and
Slide 20: Fiduciary Duties
Fiduciary Duties Duty to act prudently • Act with care, skill, prudence and diligence • Use external resources if needed to supplement expertise » Caution if external resource has conflict of interest • Procedural prudence is key • Ex: Selecting and monitoring service providers/TPAs Duty to diversif
Slide 21: Prohibited Transactions
Prohibited Transactions
Slide 22: ERISA Prohibited Transactions
ERISA Prohibited Transactions ERISA §406(a) – Transactions between plan and party in interest • Plan fiduciary cannot cause the plan to engage in certain transactions with a party in interest • Parties in interest include the employer, plan fiduciaries, service providers, the union, and statutorily
Slide 23: ERISA Prohibited Transactions
ERISA Prohibited Transactions ERISA §406(b) – Transactions between plan and fiduciary • Plan fiduciary cannot deal with the assets of the plan for its own interest (self-dealing) • In any transaction involving the plan, plan fiduciary cannot act on behalf of a party whose interests are adverse to th
Slide 24: Examples of Fiduciary Duties as they Relate to Health Plans Subject to ERISA
Examples of Fiduciary Duties as they Relate to Health Plans Subject to ERISA
Slide 25: Managing ERISA Plan Assets
Managing ERISA Plan Assets W H AT A R E P L A N A S S E T S ? Plan assets can exist in three ways: 1 Employee Contributions General assets Funded Arrangements Employer dollars that are not 1) Segregated account where plan has segregated into a separate 2 beneficial interest account for the payment o
Slide 26: Managing ERISA Plan Assets
Managing ERISA Plan Assets D U T Y O F L O YA LT Y & E X C L U S I V E B E N E F I T R U L E ERISA plan sponsors must use plan assets for the exclusive benefit of plan participants. Providing benefits to plan participants; or Used to defray reasonable administrative expenses directly “benefitting th
Slide 27: Managing ERISA Plan Assets
Managing ERISA Plan Assets EXAMPLES OF MANAGING ERISA PLAN ASSETS Medical Loss Ratio (MLR) Rebates Participant Forfeitures and Experience Gains • If any portion of the MLR rebate constitutes plan • Health FSA: Use-or-Lose Rule assets (e.g., participant premiums), ERISA’s » Any health FSA contributio
Slide 28: Selecting & Monitoring Service Providers - Examples
Selecting & Monitoring Service Providers - Examples D U T Y O F L O YA LT Y & D U T Y T O A C T P R U D E N T LY Selecting Service Provider/TPA • Selecting plan service providers/TPAs is a fiduciary function when the third-party performs services that are fiduciary in nature (e.g., claims adjudicati
Slide 29: Selecting & Monitoring Service Providers - Examples
Selecting & Monitoring Service Providers - Examples D U T Y O F L O YA LT Y & D U T Y T O A C T P R U D E N T LY Monitoring Service Provider/TPA • Ongoing fiduciary duty to proactively monitor TPA • Plan fiduciaries should establish a formal review process and follow it at reasonable intervals to de
Slide 30: Recent Case Law
Recent Case Law
Slide 31: Johnson & Johnson ERISA Class Action Lawsuit
Johnson & Johnson ERISA Class Action Lawsuit Lawsuit On February 5, 2024, a class action lawsuit was filed by and on behalf of participants of a group health plan sponsored by Johnson & Johnson alleging mismanagement of the prescription drug benefit program (J&J uses a VEBA trust to fund benefits) A
Slide 32: JP Morgan ERISA Class Action Lawsuit
JP Morgan ERISA Class Action Lawsuit Lawsuit On March 13, 2025, the same plaintiffs’ firm that filed the J&J case filed another class action lawsuit against JPMorgan (and personally sued executives on the comp & management committee) claiming it mismanaged the prescription benefits program offered u
Slide 33: Wells Fargo ERISA Class Action Lawsuit
Wells Fargo ERISA Class Action Lawsuit Lawsuit On July 30, 2024, a class action lawsuit was filed by and on behalf of participants of a group health plan sponsored by Wells Fargo & Company (and other parties) alleging that mismanagement of the prescription drug benefit program led to excessively hig
Slide 34: What do these cases mean for fiduciaries?
What do these cases mean for fiduciaries? • Transparency laws increase data available to plan participants and fiduciaries, contributing to more class action lawsuits alleging ERISA fiduciary breaches by plan sponsors and administrators • This data availability heightens expectations for fiduciaries
Slide 35: Enforcement
Enforcement
Slide 36: Fiduciary Liability
Fiduciary Liability ERISA § 409 • Personal liability for fiduciary breach » Person who is a fiduciary with respect to a plan can be personally liable for losses caused to the plan and liable to restore to the plan any profits the fiduciary made through use of plan assets ERISA § 502 • Civil enforcem
Slide 37: Fiduciary Liability
Fiduciary Liability ERISA § 502 • DOL Enforcement » Any breach of fiduciary responsibility by a fiduciary or » Any knowing participation in such a breach or violation by any other person, the DOL may assess a civil penalty against the fiduciary or other person in an amount equal to 20% of the amount
Slide 38: Plan Governance and Best Practices
Plan Governance and Best Practices
Slide 39: Plan Governance
Plan Governance PEOPLE, PLAN DOCUMENTS, PROCESSES • Who should be appointed named fiduciary and plan administrator? » Three basic approaches o Plan sponsor – Common approach historically for health and welfare plans – Responsibilities typically delegated to employees or a committee to act on behalf
Slide 40: Plan Governance
Plan Governance • Appointment of named fiduciary and plan administrator » Named fiduciary and plan administrator must be identified in the plan document o Should also be identified in SPD » Document where there are delegated fiduciaries • Establish governance structure (e.g., committee) » Additional
Slide 41: Plan Governance
Plan Governance Training for plan fiduciaries • Plan fiduciaries should be aware of the fiduciary duties, their roles and what functions can trigger fiduciary duties, their responsibilities, potential liability as a fiduciary, etc. • Plan fiduciaries should be familiar with the plan document and SPD
Slide 42: Plan Governance
Plan Governance • Ensure plan documents are in place and they are followed in the administration of the plan Plan document should contain certain information (e.g., named fiduciary, eligibility, funding, claims procedures, ability to amend and terminate the plan) Decisions should be made in acco
Slide 43: Additional Tips for Employers
Additional Tips for Employers Understanding fiduciary responsibilities is important for a group health plan’s security and compliance with the law. The following tips may help as a starting point: • Employers should identify plan fiduciaries, and be clear about the extent of their fiduciary responsi
Slide 44: HRCI and SHRM Credits
HRCI and SHRM Credits This Program, ID No. 693542, has been approved for 1.00 HR (General) recertification credit hours toward aPHR , aPHRi , PHR®, PHRca®, SPHR®, GPHR®, PHRi and SPHRi recertification through HR Certification Institute® (HRCI®). Brown & Brown is recognized by SHRM to offer Professio
Slide 45: Find your solution at BBrown.com
Find your solution at BBrown.com DISCLAIMER: Brown & Brown, Inc. and all its affiliates, do not provide legal, regulatory or tax guidance, or advice. If legal advice counsel or representation is needed, the services of a legal professional should be sought. The information in this document is intend