BIP Summer 2024

Professional Development

The health plan fiduciary blind spot By Jennifer Spiegel Berman

employees? Not exactly. When making decisions in establishing a plan, called “settlor” functions, it’s OK for an employer to act on its behalf. But, once an employer turns to administering the plan, it starts to act as a fiduciary, and that’s when it has to act on behalf of the plan participant. Once the employer is acting on behalf of the participants, it has to be able to make good decisions and demonstrate that it has made those good decisions. Many retirement plan sponsors are already doing this. They have committees that meet quarterly with their investment advisors to ensure that the vendors servicing their plan provide good service, appropriate fees, investment objectives are being met, etc. So, what is fundamentally different about health and welfare benefit plans? Nothing. A real-world example A lawsuit against Johnson & Johnson, filed on Feb. 5, 2024, alleged breaches of fiduciary duty concerning the management of the company’s prescription drug benefits. The lawsuit claims that Johnson & Johnson and its benefits committee failed to act prudently — especially with the selection and lack of oversight of their PBM. Strikingly, committee members were named personally. More striking is that Johnson & Johnson had a health and wel fare benefits committee that met

Plan sponsors should consider creating a fidu ciary committee to make critical decisions on behalf of the plan participants. “ ”

It’s impossible to walk a benefits trade show floor without hearing the term “fiduciary duty,” but there remains a critical gap in many organizations’ understanding of the formal fiduciary structures and controls ERISA requires. The rules surrounding fiduciary duties apply beyond retirement benefits. ERISA requires plan fiduciaries to act exclusively in the best interests of plan participants and beneficiaries. Does this mean that employers are always required to act only in the best interests of their

Once the employer is acting on behalf of the participants, it has to be able to make good decisions and demonstrate that it has made those good decisions.

sorbetto / iStock

14 bip magazine Summer 2024