ERISA Fiduciary Governance (Part 1 of 4)

[0:00] Welcome and Housekeeping

Amber:

Welcome, everyone, to “Let’s Focus on ERISA Fiduciary Obligations and Governance.” Thank you so much for joining us. The Benefits Compliance team will be answering the questions you send through the Q&A today. We’ll try our best to get to all of them. If we’re unable to respond during the session, please follow up with your advisor.

Today’s presentation is being recorded. You will receive a follow-up email with a link to the full recording and the PowerPoint slides by Monday. These will also be available on the NFP website.

Now, I’ll hand it over to Carol Wood, Vice President and Counsel of NFP Benefits Compliance, and Chase Cannon, Senior Vice President and Deputy Chief Compliance Officer of NFP Benefits Compliance. Chase, the floor is yours.

[0:49] Introduction and Disclaimer

Chase:

Thank you so much, Amber. We always appreciate your help hosting our webinars.

It’s a busy March — spring break, St. Patrick’s Day, and March Madness — so we appreciate you making time to be here. Today’s topic is both challenging and fun: ERISA fiduciary obligations and governance.

Quick disclaimer: This presentation is for general guidance only and is not intended to constitute legal or tax advice. For application of the law, consult legal or tax counsel. Our content is current as of today, March 19, 2025, but developments may occur.

[3:00] Agenda Overview

1. Introduction
2. Legal Developments & Environmental Shift
3. Fiduciary Duties & Legal Standards
4. Employer Action Steps
5. Key Takeaways & Resources

[3:51] Fiduciary Duties: Not New, But in a New Spotlight

Chase:

ERISA fiduciary concepts are not new, but recent developments have brought new attention to them. We’re going to help reframe how you think about these ongoing obligations — not as one-time compliance tasks, but as a process for making plan-related decisions.

[7:01] Key Developments: Legislation, Litigation, Regulation

Carol:

Thanks, Chase. We’ve seen a notable shift toward fiduciary focus in Group Health Plans — previously more common with retirement plans. Key developments:

• Transparency Laws:
  • Hospital Price Transparency Rule
  • Transparency in Coverage Rule
  • Consolidated Appropriations Act (CAA) 2021
    • Gag clause attestations
    • RxDC reporting
    • Broker compensation disclosures

These were intended to reduce rising healthcare costs and improve information access for employers and participants.

• Impact on Plan Sponsors:
  • Transparency has raised expectations. Employers — especially self-insured — now have more responsibility and access to plan cost data. There are also new data analytics tools available, including through NFP.
• Fiduciary Breach Lawsuits:
  • More data = higher bar. Class action law firms are suing plan sponsors (especially over pharmacy benefit plans), alleging failure to manage PBMs, negotiate fair pricing, and monitor compensation.
• Regulatory Focus:
  • The DOL published a guide on Group Health Plan fiduciary responsibilities.
  • Cybersecurity guidance now applies to health and welfare plans.
  • Executive order issued for stronger enforcement of transparency rules.

[17:07] Who Are Fiduciaries?

Chase:

Anyone with discretionary authority over plan management or assets. Categories include:

1. Named Fiduciaries:
   1. Usually the plan sponsor or administrator (e.g., board of directors).
2. Delegated Fiduciaries:
   1. Third parties (e.g., TPAs) with formally delegated authority.
3. Functional Fiduciaries:
   1. Individuals acting with discretionary authority — regardless of title.
4. Non-Fiduciaries:
   1. Service providers performing ministerial duties (e.g., FSA vendors).

[30:01] Fiduciary vs. Settlor Functions

Carol:

Fiduciary duties apply to administrative functions — not to business decisions (settlor functions) like plan design or termination. However, implementing those decisions (e.g., issuing an SBC) is fiduciary in nature.

Employers wear “two hats” and should document decisions separately when acting as a fiduciary vs. a settlor.

[31:56] Core Fiduciary Duties

• Follow the Plan Document:
  • Know and operate according to plan terms. Misalignment can be a fiduciary breach.
• Duty of Loyalty:
  • Act in the best interest of participants. Avoid self-dealing and ensure proper use of plan assets.
• Duty of Prudence:
  • Act with the care of a prudent expert. Focus is on the decision-making process, not the result.

[39:02] Establishing a Fiduciary Governance Structure

Chase:

Consider a committee approach — especially if self-insured — to distribute responsibility and improve oversight. Committee advantages:

• Helps document prudent processes
• Limits personal liability
• Mirrors retirement plan governance

Appoint members with relevant knowledge. Use a board resolution and formal committee charter. Training and acknowledgment forms are also recommended.

[46:46] Decision-Making and Documentation

Carol:

Establish committee procedures similar to corporate bylaws: membership, quorum, voting, meeting frequency. Document all decisions with formal minutes — even without a committee. Minutes should:

• Show prudent analysis
• Be drafted promptly and approved
• Avoid unnecessary detail that could be used in litigation

[50:16] Selecting and Monitoring Service Providers

Chase:

Apply a prudent process. Consider:

• Reasonableness of costs
• Service quality
• Professional qualifications and experience
• Legal history and litigation
• Network quality and access

Use compensation disclosures (408(b)(2)) to review fees, bundling, and indirect compensation. Continuous monitoring is key.

[54:26] Protecting Fiduciaries from Liability

Carol:

Fiduciaries can face:

• Personal liability
• Lawsuits from participants
• Civil penalties and audits

Protections include:

• Fiduciary Liability Insurance
• Indemnification by the employer

NFP can help assess and provide fiduciary liability coverage.

[58:05] Final Takeaways

Chase:

This is not going away — enforcement and litigation will only increase. Employers should:

• Understand fiduciary obligations
• Implement a governance process tailored to your plan
• Use the tools and templates in our publication
• Reach out to NFP for training and assistance

[59:04] Resources

Chase:

Our publication includes:

• Overview and checklist
• Sample meeting minutes
• Committee charter and duties
• Board resolution and appointment letters

This will be shared via email along with the webinar recording and slides.

[1:00:49] Upcoming Webinars

Save the dates for our Fiduciary Focus series:

• May 21
• July 16
• September 17
  • (All at 3 PM ET)

Also, look out for our ERISA 101 webinar in April — covering broader ERISA requirements like SPDs, 5500s, and more.

[1:02:08] Closing Remarks

Amber:

Thank you, Chase and Carol, for your time and insights. The webinar was recorded — you’ll receive an email with the recording, slides, and our publication by Monday.

Please complete the short survey at the end of this session. It helps us tailor our education programs to what matters most to you.

Thank you for joining us today. Have a great day!