In connection with the pending, fully briefed and argued appeal in Faber v. Metropolitan Life Ins. Co., the Second Circuit Court of Appeals requested that the Department of Labor provide answers to three questions related to the use of Retained Asset Accounts (RAAs) to pay insurance benefits under an ERISA-governed plan.

The Department of Labor’s response, filed February 17, 2011, relied on the fact that ERISA does not place restrictions on the method by which welfare benefit plans provide benefits, so long as the method chosen is set forth and communicated to participants in plan documents. Accordingly, the Department of Labor commented that the “key question” to be addressed in Faber is whether the provision of life insurance benefits through RAAs complies with the terms of the relevant Plans.

The Department of Labor opined that, contrary to the facts at issue in the First Circuit’s decision in Mogel v. UNUM Life Ins. Co. of America, the terms of the Plans at issue in Faber specifically provided for the payment of benefits through RAAs. Further, pursuant to the Plans’ terms, MetLife’s ERISA-governed fiduciary obligations to the Plans, its participants, and beneficiaries cease at the time benefits are paid into RAAs, and the maintenance of the RAAs is controlled by individual accountholder agreements between MetLife and RAA accountholders. Thus, according to the Department of Labor, the District Court appropriately dismissed plaintiffs’ putative class action claims because, at the time benefits are paid into RAAs, any fiduciary obligations as to the payment of plan benefits through the RAAs are satisfied and the funds deposited into the RAAs are not Plan assets. For more information on the Department of Labor’s response, see the February 22, 2011 client alert at