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Courts Address ERISA Fiduciary Responsibilities

Two recent court rulings addressed fiduciary requirements relating to the Employee Retirement Income Security Act (ERISA).


The Department of Labor (“DOL”) announced in a recent media statement that it will not enforce the 2016 fiduciary rule at the present time. The action follows a March 15 ruling by the U.S. Court of Appeals for the Fifth Circuit that vacates the fiduciary advice rule. In a contrasting opinion, the Tenth Circuit recently upheld a provision of the fiduciary rule.

Technically, the Fifth Circuit court decision is binding only in the states of Texas, Louisiana, and Mississippi within the Fifth Circuit. The DOL announcement, however, applies on a national basis.

The disparity in court rulings reflects the many sides of the fiduciary rule, which has been subject to multiple delays in its implementation.

In late 2017 the DOL announced an 18-month delay, from Jan. 1, 2018, to July 1, 2019, for final adoption of the fiduciary rule.

We previously wrote on the DOL fiduciary rule in a March 2017 article titled “DOL Seeks Comment on President’s Proposal to Postpone Fiduciary Rule,” and an August 2015 article titled “Proposed Fiduciary Rule Elicits Strong Debate.”

A central element of the DOL’s proposed rule was to classify more financial advisers as fiduciaries. The range of activities that would be considered to be “investment advice” was expanded under the proposed rule, to potentially include selling mutual funds, variable and indexed annuities, or variable life products in connection with an IRA or an employee benefit plan governed by ERISA.

The future of the fiduciary rule remains uncertain after the appellate court and DOL actions.


The U.S. Court of Appeals for the Ninth Circuit recently issued an opinion in a class action case against Transamerica that addressed the fiduciary responsibilities of a third-party administrator.* Key findings from this appellate ruling appear below.

An employer that forms an ERISA plan is a statutory fiduciary.

A party not named in the plan documents may also become a fiduciary—sometimes referred to as a “functional” fiduciary—under the following circumstances,

-- He exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets,

-- He renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or

-- He has any discretionary authority or discretionary responsibility in the administration of such plan.

A plan administrator is not an ERISA fiduciary when negotiating its compensation with a prospective customer.

When a service provider’s definitively calculable and nondiscretionary compensation is clearly set forth in a contract with the fiduciary-employer, collection of fees out of plan funds in strict adherence to that contractual term is not a breach of the provider’s fiduciary duty.


ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan's management or assets, including anyone who provides investment advice to the plan for a fee.

Retirement plan trustees, plan administrators, and investment committee members are typically considered to be fiduciaries under an ERISA retirement plan.

The most common types of ERISA retirement plans include defined benefit plans, defined contribution plans, simplified employee retirement plans (SEPs), and 401(k) plans (which are a type of defined contribution plan).

An ERISA fiduciary is required to act in a manner consistent with the guidelines listed below.

-- Manage the plan completely in the interests of participants and beneficiaries, with a primary focus on providing benefits and paying plan expenses.
-- Act in a prudent manner to manage and diversify the plan's investments, while also seeking to avoid large losses.
-- Follow the terms outlined in ERISA plan documents.
-- Avoid conflicts of interest, including any transactions that might benefit plan sponsors or service providers to the detriment of plan participants.

ERISA also governs health and welfare plans. A private group health plan that is established or maintained by an employer or a union for the purpose of providing medical care for participants and their dependents is often covered by ERISA.

The Employee Benefits Security Administration (EBSA) within the Department of Labor is the agency responsible for administering ERISA compliance in regard to qualifying health plans.

ERISA also requires that plan sponsors provide participants with detailed documentation, including a summary plan description (“SPD”). The plan documents must clearly identify the plan sponsor, describe all procedures governing claims benefits, explain qualification requirements, and explain the appeals process for denied claims.

Plaintiff or defense attorneys who are interested in learning more about these or other cases involving ERISA fiduciary duties are invited to contact ERISA expert Mark Johnson for details.

* See Santomenno v. Transamerica Life Ins. Co., 883 F.3d 833 (9th Cir. 2018).

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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