In today’s complex regulatory environment, understanding the role of an employee benefit fiduciary is essential for both employers and employees. Fiduciaries are the backbone of any employer-sponsored benefit plan, ensuring that the plan operates in a fair, transparent, and legally compliant manner. Here’s an in-depth look at what it means to be a fiduciary, the responsibilities involved, and how to stay compliant with current regulations.

What is an Employee Benefit Fiduciary?

Originally established under the Employee Retirement Income Security Act (ERISA), a fiduciary is any individual or entity that has the authority or control over the management of an employee benefit plan.  Largely only applicable to employer retirement plan sponsors, until the Consolidated Appropriations Act in 2021 where the definition was expanded to include individuals who execute control over employer sponsored healthcare plans.   This can include employers, plan administrators, and sometimes even individual employees who help manage the plan. Essentially, if you make decisions about or oversee the administration of a benefit plan, you’re a fiduciary.

Core Responsibilities of Employee Benefit Fiduciaries

Being a fiduciary comes with significant responsibilities. Here are some key obligations:

1. Acting in the Best Interest of Plan Participants: Fiduciaries must always act in the best interest of the plan participants and beneficiaries. This means making decisions that prioritize their needs and welfare, and avoiding conflicts of interest.
2. Providing Competitive and Transparent Options: Fiduciaries must ensure that the health and pharmacy options provided through the plan are competitive and transparent. This involves offering high-quality care at fair prices and making sure that all plan options are clearly communicated to participants.
3. Maintaining a Legally Defensible Approach: Fiduciaries need to document their decision-making processes and ensure that their actions are legally defensible. This documentation helps protect against potential legal challenges and demonstrates compliance with ERISA standards.

Understanding Fiduciary Responsibilities: Self-Funded vs. Fully Insured Plans

With a self-funded plan, the employer assumes the financial risk of providing health benefits. Employers typically have discretionary authority over plan design and administration, making them fiduciaries. They are responsible for ensuring the plan meets ERISA standards and provides fair benefits to employees. With fully insured plans, the insurance company often acts as a co-fiduciary and assumes some financial risk.  The employer’s fiduciary status applies as they execute control over carrier and vendor selection along with plan design and cost sharing measures.  It is important, regardless of company size, industry or geography, to execute a sound, accountable and prudent acquisition process.  

Recent Regulatory Changes: The Consolidated Appropriations Act (CAA)

The Consolidated Appropriations Act (CAA) introduced new fiduciary requirements aimed at increasing transparency and protecting plan participants. Key changes include:

1. Removal of Gag Clauses: Fiduciaries must remove any gag clauses from contracts with providers, third-party administrators (TPAs), or other service providers that restrict the disclosure of cost and quality information.
2. Cost-Sharing Information: Plan sponsors must provide clear and accessible information about cost-sharing requirements to help participants understand their financial responsibilities.
3. Reporting Drug Costs: The CAA requires transparency in reporting pharmacy benefits and drug costs, ensuring participants are informed about the costs associated with their prescriptions.
4. Preventing Surprise Billing: New protections must be implemented to guard against unexpected medical and air ambulance bills.
5. Non-Quantitative Treatment Limitations: Fiduciaries are required to perform analyses to ensure that non-quantitative treatment limitations for mental health and substance use disorders are comparable to those for medical and surgical benefits.

Consequences of Fiduciary Breach

Fiduciaries can face significant consequences for failing to meet their obligations under ERISA. This can include personal liability for plan losses, the requirement to restore any profits made from misuse of plan assets, and other equitable remedies as determined by the court. Maintaining strict adherence to fiduciary duties is crucial to avoid these serious repercussions. Most recently, we’ve seen law suits on the rise implicating employers due to the costs of prescriptions inside a benefit plan, (Johnson & Johnson law suit) as well as the cost of out-of-network services (Mayo Clinic law suit) and in both cases, employees are seeking monetary damages against their employers. 

How BSI Supports Plan Fiduciaries 

To help fiduciaries meet their responsibilities, BSI account teams follow a documented market analysis of all lines of coverage annually.  We evaluate quality, cost, value and effectiveness of all programs tied to a health and welfare plan.  Working with clients to outline decision making process, benefit strategy and effective employee communication strategies, BSI provides clients with a repeatable and prudent acquisition process.  In addition, BSI offers access to a dynamic and intuitive, data analytics engine, Innovu.  Innovu’s proprietary benchmarking tools, including Rx analysis, smart cohort, and plan design benchmarking, allow employers to compare benefit costs accurately to ensure compliance with fiduciary duties. BSI further assists by organizing, timestamping, and storing essential documents, making it easier for fiduciaries to maintain compliance and demonstrate their adherence to ERISA and CAA requirements.

“Empowering clients to be effective healthcare fiduciaries means not only meeting regulatory requirements but also championing transparency, fairness, and high-quality care. It’s about guiding them to make decisions that truly benefit their employees while upholding the highest standards of responsibility and integrity.” – Nick Tranguch, Chief Growth Officer

Navigating the role of an employee benefit fiduciary requires a deep understanding of legal responsibilities and a commitment to acting in the best interests of plan participants. By staying informed about regulatory changes and leveraging available resources, BSI ensures their client fiduciaries are effectively managing their obligations and contributing to the overall success of the benefit plan. Whether you’re managing a self-funded or fully insured plan, ensuring compliance with fiduciary duties is essential for protecting both the plan and its participants.