Episode 4 – Fiduciary Duties

Mike Stull (00:10) 

Alright, we are ready to go and welcome to the Employers Health Benecast, your monthly source for clarity on health benefit trends and strategies. This is your host, Mike Stull. And here to help me with this topic is Garrett Brown, Associate Counsel with Employers Health. Welcome to the show, Garrett.  

Garrett Brown (00:28) 

Thanks, Mike, for having me. 

Mike Stull (00:30) 

 So, before we get into the topic, maybe give the audience a little bit of an intro, where you went to school, how long you’ve been with Employers Health, a little bit about your role within the team. 

Garrett Brown (00:44) 

Thanks, Mike. I’m Associate Counsel at Employers Health. I support the Employers Health team and our members in general. I’ve been with the organization for five years. I attended Ohio Northern University and graduated with a degree in pharmacy business with a focus in economics. And I attended law school at the University of Akron. 

Mike Stull (1:01) 

Great. Well, let’s start this conversation by providing the audience with a baseline of what it means to be a fiduciary and who serves as a fiduciary in an employer-sponsored plan. 

Garrett Brown (1:15) 

 Thanks, Mike. 

And that’s a good question and a question that we get very often. Before addressing that question directly, I think it’s good to provide a little bit of background, as this question primarily originates from an ERISA perspective. So, I think it’s helpful to have a little bit of a background as far as what ERISA is, who ERISA applies to, to get a little bit better context for the question itself. 

So, ERISA was enacted to create a minimum standards of protection for pension plans and welfare plans. Among other functions, ERISA standards sought to ensure that plan and participant interests are protected and to establish a fiduciary relationship between a plan and its participants. So, what that means on, I guess, as a functional level, it’s important to understand that the relationship that ERISA tried to create. 

So, what ERISA does is it creates a trust-like relationship. So, to kind of unpack that a little bit, and this will probably be a little bit more, I guess, accessible to those who have maybe gone through some type of estate planning, is to think of it like a trust. So, when a trust is created, typically you have the person creating the trust. So that person, in trust language, is called the settler. So that’s the person who creates it, outlines the terms of it, puts assets into the trust, and decides who ultimately benefits from those assets. So, in the trust-like arrangement, so you have the settler who has created it. 

The settler typically doesn’t administer the trust themselves, so they need someone called the trustee. So that’s someone who administers the trust in accordance with the direction, or typically pursuant to a written document that the settler’s executed, and administer, the trustee then administers the trust for the benefit of the beneficiaries. So pretty straightforward. Many of you are probably likely familiar with that concept. But what ERISA does is it tries to apply that type of a relationship to a pension plan or a welfare plan. Applying that to that scenario, typically you have the plan sponsor, so that’s typically the same as the settler, and then the settler establishes the plan. It generally will set forth the general terms of the plan, identify under what scenario the beneficiaries, typically the employee and their families, are able to receive benefits, that type of thing. Instead of a trustee, you typically have a plan administrator, and this shouldn’t be confused with a third-party administrator, but a plan administrator, and then ultimately you have your plan participants who are the beneficiaries.  

So, when we’re talking about the fiduciary duties under a plan, just as a trustee under a trust owes a fiduciary duty to the beneficiaries, there’s a parallel here between how the plan administrator, acting on behalf of the plan sponsor, owes a fiduciary duty to the beneficiaries. 

Mike Stull (4:27) 

So, a lot of good information there. So, the employer, the plan sponsor, is in effect the one establishing the plan in the same way that a settler would establish a trust. The plan administrator, not to be confused with a third-party administrator like a health insurance carrier or a pharmacy benefit manager, but the plan administrator who oversees the plan has the fiduciary responsibility to the beneficiaries, which in this case are the plan enrollees. 

Garrett Brown (5:08) 

Yep, that’s exactly right, Mike, and I think it’s worth mentioning as well, many times an employer will wear two hats, so most of the time we’ll see that the employer is both the plan sponsor and the plan administrator. So, I think this might start to get to the heart of the question that Mike posed initially, who’s a fiduciary and, you know, when do those fiduciary standards apply? This gets a little bit more nuanced, especially as you have an employer that’s wearing both hats, so to speak. 

 Relative to who’s a fiduciary, so first and foremost, just as kind of harkening back to the trust concept, just like a trust, everything’s administered by or governed by a document typically. So first and foremost, a fiduciary is anyone that’s identified by the documents that create the ERISA plan. But then going off of that, and this is a divergence, at least to my knowledge, from a traditional trust construct, is anyone who has discretionary authority under the plan or the plan’s assets is deemed a fiduciary for the purposes of ERISA. So, it creates somewhat of a gray area, and some of you may be potentially scratching your heads, well, what exactly does that mean? But before we flush that out, it’s important to note what functions or what type of decisions are settler decisions and what type of decisions are plan administrator decisions. 

Settler functions are not a fiduciary decision. So, the decision to create the plan, the design of the plan, those types of things, just as the person that’s creating the trust doesn’t own a fiduciary duty to the beneficiaries, the settler in this case doesn’t own a fiduciary duty or the plan sponsor doesn’t own a fiduciary duty to the beneficiaries. You might ask, well, what type of decisions are left then? So, these are decisions that the plan administrator would be making. Specifically, these are decisions around implementing the terms of the plan, so specifically vendor selection and management, communication to the participants about changes to the plan. So, we talk about, most of you are familiar with, distribution of your SPCs, SPD, those types of things, those are fiduciary duty, and then management of any kind of assets under the plan. Going back to kind of the original question, who’s a fiduciary? It’s anyone that has fiduciary duty or discretion over those types of assets or those types of decisions under the plan or anyone that’s specifically identified in the plan documents as a fiduciary. 

Mike Stull (8:00) 

Great. Well, thank you for that background on who is a fiduciary. So, the question at hand asked by one of our listeners was, how does Employers Health help or does Employers Health have any resources or services that would help our employer members comply with those fiduciary responsibilities?  

Garrett Brown (8:26) 

Sure. So, Employers Health helps with these functions in a variety of ways. So certainly, Employers Health provides resources. One example would be compliance dashboard, so that’s a service provided by the company compliance dashboard. What that does is it identifies different types of regulations, obligations, a lot of them surrounding notices, that type of things. So that’s a service that Employers Health has gone out, identified within the market, and is providing to its members at preferred price. So, there’s one example. 

Additional examples include ongoing member education and speakers. It’s important to note that while in some cases we do advertise the event purely relative to ERISA and fiduciary obligations, the way that the law is set up, many of the different ACA notice requirements and those types of regulations, if they’re not appropriately implemented into the plan, failure to provide the notices or administer the plan in accordance with the laws set up for a fiduciary violation. So certainly, education specific to this topic is certainly applicable, but a lot of times the building blocks of all the other ACA, health care reform, all those type of things, all circle back to helping plan sponsors meet their fiduciary duty. 

And another way, and a way that might be a bit more subtle, is within some of our group purchasing programs themselves. So, one example would be our PBM program. So, within that, there are a variety of things that we’ve done to make a conscious effort to help plan sponsors meet their fiduciary obligation. Those include an audit that occurs of the program, an annual market check that goes out and ensures that the pricing contained within the agreements is competitive within the market. And also, one of the obligations within ensuring that a plan sponsor is meeting its fiduciary duty is to have the requisite knowledge. And if the requisite knowledge isn’t contained within the plan administrator itself, is to go out and ensure that the appropriate individuals are being consulted or are able to provide the information necessary to manage the benefit. So, within our PBM program, we certainly are experts within the market and help the plan sponsor meet its obligations relative to that.  

Mike Stull (10:57) 

And we provide a good paper trail as well, which is, I’m sure, another kind of tip as we think about closing out this discussion on tips that employers can use to, or plan administrators, or those serving in a plan administrator role, on how they can make sure that they satisfy their fiduciary responsibilities. So, what are one or two tips that people can follow?  

Garrett Brown (11:25) 

Well, Mike, you stole a little bit of my thunder. So, my first major tip was to document. So, it’s important to document. And when you document, make sure that you’re following any type of internal process that the plan documents require or that you’ve identified as a best practice. 

The second major takeaway was, where necessary, engage an expert. So, an expert in terms of the line of business that you’re working on. And in a lot of cases, if you followed the PBM webinars from earlier this year, we noted that you don’t always find a particular firm that has all of the expertise contained within that firm. It’s okay, particularly for larger employers, and we see this a lot, where larger employers may work with different firms based on the expertise of those firms. I think that that is an important distinction that, you know, for, again, going back to pharmacy, there’s not a lot of people out there serving in a consultant role that necessarily understand pharmacy to the degree needed to run a real comprehensive RFP, be able to analyze the results and interpret the results in a way that make the most sense for the plan and its participants. So, making sure that you’re using an expert or a consultant that does understand pharmacy and can help you analyze and interpret those results so that you can make that best decision. And I guess I forgot to ask this question, but we’d be remiss if we didn’t cover it before ending, and that is, are there plan sponsors that ERISA doesn’t apply to?  

Garrett Brown (13:14) 

And that’s a great point, Mike. It should be noted that generally public employers are not subject to ERISA. That said, this subject matter is still somewhat applicable in the sense that the whole concept of ERISA is seeking to ensure that the plans are appropriately managed, and the participants have a good experience within the plan and receive the benefits that the employers have promised as a condition of their employment. So, it’s important to note that. It’s also important to note that some states have laws that to some extent parallel the obligations that are found in ERISA. So, while a plan sponsor may not be subject to ERISA per se, some state laws that govern the operation of public employer plans may still be on the hook for some degree of compliance with an ERISA companion law. 

Mike Stull (14:18) 

Great. Well, thank you, Garrett.  

And again, to our audience, we encourage you to submit questions regarding HR and benefits. You can do so by going to our website at www.employershealthco.com and completing the field on the landing page of our Benecast or clicking the link titled Submit Your Questions Here. And be sure to tune in in December to hear the answers to your questions. Again, thanks, Garrett. 

A complex topic. And if you have follow-up questions for Garrett, how can people reach you?  

Garrett Brown (15:00) 

Probably the easiest way is to work through your account manager. I’m happy to answer any questions that you may have or certainly should be able to point you in the right direction if it’s something that we’re not able to handle. 

But thanks again, Mike, for having me on the podcast.  

Mike Stull (15:15) 

Great. Thank you. 

And now it’s time for Employers Health News. What’s happening at Employers Health? We’re committed to providing learning and networking opportunities to our membership. And you can join us at one of our upcoming learning events. 

Annual membership meeting will be held December 7th. The annual membership meeting will be held at the Conference Center at Kent State Stark from 8 to 10 a.m. with a keynote by Dr. Surya Singh, Corporate Vice President and Chief Medical Officer at CVS Specialty. So, again, December 7th, our annual membership meeting, Conference Center at Kent State Stark starting at 8 a.m. You can find more information on our website at employershealthco.com. And don’t forget to follow us on LinkedIn and Twitter to stay up to date on all upcoming Employers Health events. 

Also be sure to join us for one of our member holiday luncheons, which will be held throughout the state of Ohio. And we’re also having one in Chicago this year. 

 In other team news, our account management team continues to grow. We recently welcomed Travis Johns and Devon Feriance as account management specialists. Travis is new to our team. And as many of you know, Devon was on our marketing events and communications team and so handled a lot of our events, including our annual employer symposium. 

So, Travis and Devon, best wishes on their new roles. I know they’re very excited to begin working with our member organizations.  

We’re still interviewing for another account management team member. So, as we’re on pace to add approximately $100 million in new business to our program each and every year, we need additional team members to help deliver on the strong value that our members have come to expect by being part of Employers Health. So, looking for passionate individuals with the right skill set to be member-centric and provide good value back to our member organizations. 

So, there’s always something new at Employers Health. Again, make sure you follow us on LinkedIn or Twitter to stay updated. Please be sure to also submit your questions so that we can answer them in upcoming editions of the Employers Health Benecast.  

Also, if you’d like to be considered for the $50 Visa gift card, the code word for this episode is Benefits. So, please submit the code word Benefits, along with your name and email address, using the link on the landing page to be entered to win the $50 Visa gift card.  

So, that will conclude this month’s show. Thank you again for taking the time to listen. 

But, as always, most important, thank you for your continued membership and interest with Employers Health. There’s so many good things that have gone on this year. A lot of new growth, a lot of good success within our existing membership, and we know that it takes a team effort to accomplish those things. And without the teamwork and partnership of our member organizations, none of that could be accomplished. So, thank you, thank you again to all of our members for their continued participation in our program. So, with that, we hope everyone has a seamless open enrollment season. 

Be well, and we’ll see you real soon.