Employers offer group health plans because they’re required to by law or, if they’re smaller employers, because they feel it is an important benefit for their team. Any individual involved with a group health plan who maintains discretion over plan assets or administration is a fiduciary with certain associated responsibilities. Specifically, employers sponsoring group health plans are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), which sets standards of conduct for everyone involved with the management of the plan and the plan assets.
The Importance of Fiduciaries
Being a fiduciary means acting in the best interest of plan participants and beneficiaries, carrying out your duties in a prudent fashion, and following plan documents, laws, and regulations. If your business does not employ someone with the skills and professional knowledge to “act prudently” according to ERISA, then you will want to outsource functions you don’t feel like you can handle in house. Even larger businesses will likely outsource everything from accounting to legal help to ensure they comply and get the necessary professional expertise.
Fiduciaries must also take the time to make and document their plan decisions, follow the terms of the plan document as far as sending out notices, enrolling new employees, and approving benefits for participants and beneficiaries.
Understanding Fiduciary Liability
With responsibility comes the liability if problems arise. Fiduciaries who do not follow regulations and plan documents may find that they are liable to the plan participants, beneficiaries, and the plan itself to restore losses due to their actions or restore funds and profits if they improperly use the plan’s assets. In order to limit this liability, setting up and following reasonable processes and procedures in making decisions is key. Documenting why certain providers were chosen, keeping track of plan fees owed and paid, and tracking when necessary notices are mailed is part of the fiduciary job.
If an employer chooses to hire a service provider to handle their benefit plan, they are still responsible for monitoring the provider’s performance. Periodically, the employer must review reporting, check that the fees charged align with agreed-upon fees, learn and ask about the provider’s policies, and follow up on participant and beneficiary complaints.
Keeping Your Team Informed
An important part of a fiduciary’s responsibilities is making sure proper notice is given to plan participants and beneficiaries. ERISA requires that a summary plan description (SPD) document goes to each interested party that includes a variety of basic information in an easy to understand and read format. This document will include useful information on what the plan’s benefits are and what the claims procedure is if the participant has a question on a benefit’s decision.