• Fiduciaries are regularly advised by counsel about the rigorous standards against which their behavior regarding ERISA plans will be measured, and they are counseled about possible personal liability for violations of the statute. They are counseled to seek legal advice before acting and to rely upon the sanctity and confidentiality of communicationswith plan counsel in accordance with the attorney-client privilege.
  • It is often overlooked, however, that ERISA provides an exception to the attorney client privilege which could result in the disclosure of otherwise privileged communications with counsel in actions involving participants and beneficiaries.
  • The exception applies to communications involving “fiduciary” issues. In contrast, the exception is not applicable to discussions involving “settlor issues.”
  • The rationale for the exception involves the identity of the “client.” In fiduciary issue communications, the client is either the participant or beneficiary. In contrast, the client in settlor issues is the administrator or the trustee.
  • Adding further confusion is that fiduciary and settlor issues are often part of the same communication. For example, a communication about providing a benefit to a participant will not be privileged as it is deemed to be a fiduciary issue; however, the part of the same communication about the logistics of a benefit (i.e., where to send a check) would be privileged as a settlor function.
  • Due to the deleterious impact on litigation caused by the release of sensitive communications, it is suggested that fiduciaries, plan administrators, and plan sponsors recognize the fiduciary exception to the attorney-client privilege and exercise an increased level of prudence in all communications.