What’s It Mean To Be A Fiduciary?
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law setting minimum standards for most employer-sponsored health plans.
ERISA defines a fiduciary as someone who must act “solely in the interests of plan participants and beneficiaries.” Behind these formal words lie a simple truth: it’s all about employees and their families.
This approach marks a shift from past practices, where employers often prioritized company interests—or even those of brokers, TPAs, insurers, and other middlemen—over employees.
Fiduciaries have several other important obligations including:
- Acting with prudence and diligence: Making informed decisions based on research and expert advice while managing plan activities.
- Paying only reasonable plan expenses: Scrutinizing fees and costs to ensure they’re justified.
- Monitoring service providers: Keeping a close eye on vendors and ensuring they’re delivering value for the participants and plan.
- Avoiding conflicts of interest: Never letting personal or corporate interests interfere with fiduciary duties.
- Following plan documents: Adhering to the terms of the plan and governing documents.
With Great Power Comes Great Responsibility
The investment industry faced a similar upheaval years ago. Brokers had to disclose payments, investment firms revealed hidden fees, and employers faced lawsuits from angry employees.
Whether you’re a long-standing member of the benefits committee or the newest “virgin fiduciary”, it’s important to stay on top of the coming changes in health plan compliance.
Here are some proven strategies to make you effective in the role:
- Stay informed: Track evolving ERISA regulations and emerging industry trends for dealing with them.
- Review litigation: Follow legal cases to understand and avoid compliance issues.
- Build rapport: Collaborate with other fiduciaries to share knowledge and insights.
- Communicate clearly: Build trust with fellow fiduciaries and participants through effective communication.
- Use data: Leverage technology and data to improve analysis and decision-making.
- Evaluate and adapt: Find new ways to improve plan performance and participant experience.
- Be bold: Challenge the status quo, both internally and with vendors, to drive positive change.
The Benefits Fiduciary Committee
Historically, health plan management fell to a “benefits committee” often composed of HR professionals supported by insurance brokers.
Recognizing the weight of fiduciary duties, today’s “fiduciary committee” includes key executives like CFOs and general counsel for financial and risk oversight.
Further enhancing its expertise, fiduciary committees may incorporate healthcare specialists, patient advocates, legal advisors, and communication professionals.
As Helen Keller aptly expressed, “Alone we can do so little; together we can do so much.”
This collaborative approach leverages diverse skills and perspectives, but success hinges on alignment around best practices for effective teamwork.
10 Fiduciary Committee Best Practices
The strength of a fiduciary committee lies in its diverse expertise. However, to unlock its full potential, the committee must operate with clear alignment and consistent adherence to best practices.
Best practices for a high performing fiduciary committee include:
- Charter: Adopt a charter detailing the committee’s fiduciary responsibilities, including a focus on participant interests.
- Educate: Implement ongoing education for plan fiduciaries so they fully understand their responsibilities under ERISA .
- Advocacy: Have an unbiased, independent patient advocate advise and educate the committee on participant interests.
- Fee Disclosure: Ensure brokers and consultants disclose their fees even (or especially) when “the broker is a friend”.
- Agreements: Review and amend third-party contracts to ensure you receive fee disclosures, claims data, and legally required reports.
- Aligned interests: Understand and align the interest of the plan and participants with the interests of service providers.
- RFPs: Conduct a Request for Proposal (RFP) process to ensure you receive the best services at a reasonable cost with required terms.
- Documentation: Document policies and decision-making processes when managing health plan vendors.
- Monitor: Establish a process to monitor services and fees to ensure they are reasonable in relation to local and industry standards.
- Communications: Share plan updates and compliance efforts with participants to demonstrate a commitment to cost-effective benefits.
Key Takeaways
For Health Plan Fiduciaries:
- Embrace the Role: Being a fiduciary is an opportunity to impact the lives of employees and families and protect the company from risk.
- Act Prudently: Make informed, data-driven decisions prioritizing the needs of plan participants.
- Stay Informed: Continuously educate yourself on ERISA regulations, industry trends, and potential legal risks.
- Collaborate and Communicate: Connect and work effectively with fiduciary committee members and other stakeholders.
For The Fiduciary Committee:
- Establish Best Practices: Adopt a charter, provide ongoing training, and ensure unbiased advocacy.
- Focus on Solutions: Proactively address high-cost claims and complex situations.
- Manage Vendors Effectively: Conduct RFPs, review agreements, disclose fees, and monitor performance.
- Document and Communicate: Document decisions and processes, and communicate regularly with plan participants.
