Fiduciary FAQ

ERISA (Employee Retirement Income Security Act of 1974) is the federal law governing most employer-sponsored employee welfare benefit plans (including health, life, and disability coverage).

If your company offers a welfare benefit plan and is not a governmental or church employer, ERISA applies. ERISA requires plan fiduciaries to:

• Act solely in the interest of plan participants
• Act prudently and with care
• Follow plan documents
• Ensure plan expenses are reasonable
• Avoid conflicts of interest that could impair independent judgment

For most CEOs and CFOs, ERISA creates legal accountability for how your health plan is governed — including vendor selection and oversight.

A fiduciary is anyone who exercises discretion or control over the benefit plan.

You are likely a fiduciary if you:

• Select or monitor brokers or consultants
• Choose insurance carriers or TPAs
• Approve plan design changes
• Oversee plan expenses
• Serve on a benefits or plan committee

Fiduciary status is based on function — not job title.

Under ERISA, fiduciaries are held to one of the highest standards of conduct in U.S. law.

Among other things, welfare benefit plan fiduciaries must:

1. Act in participants’ best interest. Decisions must benefit employees and dependents — not vendors or internal relationships.

2. Act prudently and make informed decisions. This includes:

• Understanding vendor services
• Understanding how vendors are paid
• Comparing alternatives when appropriate
• Documenting your decision process

3. Ensure reasonable compensation. Plan expenses must be reasonable relative to services provided.

4. Monitor service providers. Oversight is ongoing — not a one-time decision.

5. Follow the written terms of the plan — provided those terms do not conflict with ERISA.

While ERISA does not require a specific structure, many employers:

• Form a benefits or plan committee
• Hold periodic review meetings
• Maintain written minutes
• Review and approve vendor contracts
• Document review of compensation disclosures
• Conduct periodic market comparisons

These governance practices help demonstrate that fiduciaries are acting prudently.

Yes. ERISA applies to both:

• Fully insured plans (employer pays premiums to a carrier)
• Self-funded plans (employer pays claims directly, often with stop-loss insurance)

The fiduciary standard is the same in both structures.

No. Employers retain fiduciary responsibility for the welfare benefit plan. Hiring a broker or consultant does not transfer that responsibility.

Fiduciaries remain responsible for:

• Selecting and monitoring service providers
• Ensuring plan expenses are reasonable
• Reviewing compensation disclosures
• Acting prudently in plan design and vendor decisions
• Following the terms of the plan consistent with ERISA

While a broker may provide advice and recommendations, the employer remains responsible for the ultimate decisions affecting the plan.

Outsourcing services does not outsource fiduciary accountability.

Failure to meet ERISA and CAA requirements can result in:

• Department of Labor investigations
• Civil penalties
• Participant lawsuits
• Personal fiduciary liability
• Reputational damage

Potentially, yes. Under ERISA, fiduciary liability can be personal if a fiduciary breaches their duties.

This does not mean every mistake creates liability. However, fiduciaries may face exposure if they:

• Fail to review compensation disclosures
• Ignore obvious conflicts of interest
• Pay unreasonable plan expenses
• Fail to monitor service providers
• Cannot demonstrate a prudent process

Good governance and documentation are the strongest protections against personal liability.