Can a TPA avoid ERISA liability by calling itself an “administrator”?
The Sixth Circuit says no.
In Tiara Yachts v. BCBS Michigan (BCBSM), the court crushed one of the industry’s most persistent myths:
“We’re not fiduciaries—we’re just following the contract.”
The court made it crystal clear:
If a TPA manages plan assets, controls payments, and has discretion over compensation, it’s a fiduciary—and must follow ERISA.
No more hiding behind contract language. No more fine print immunity.
So what’s it mean for employers?
What Happened?
Tiara Yachts hired BCBSM to administer its self-funded plan. BCBSM:
Ignored pricing agreements
Overpaid out-of-network providers using “flip logic”
Launched a “Shared Savings” program to recover those overpayments
Pocketed 30% of the recovery as profit
They created the problem, monetized the fix, and called it savings.
The Sixth Circuit Wasn’t Amused
“BCBSM knowingly squandered plan assets…”
“Contractual duties and ERISA fiduciary status are not mutually exclusive.”
“The more overpayments BCBSM made, the more money it could receive…”
Here’s how to think about what BCBSM has been doing:
An arsonist firefighter sets the blaze, charges the town to put it out, and sends a bill for saving lives.
That’s the BCBSM “shared savings” model in a nutshell.
Pocketing 30% of the “Shared Savings”
Why This Case Is a Turning Point
Industry observers are calling this ruling a watershed moment for employer-sponsored health plans.
One of the most compelling assessments comes from ERISA attorney Chris Deacon, who wrote:
“A win, a weapon, and a warning shot.”
— Chris Deacon, Founder, VerSan Consulting
Her analysis of the ruling cuts through the noise: contractual disclaimers no longer protect TPAs from fiduciary liability.
The “warning shot” is for employers, too:
If you allow these practices, ignore red flags, or don’t ask the right questions—you may be next.
This case doesn’t just change the rules for TPAs.
It changes the accountability standard for employer fiduciaries.
A Seismic Shift
The rules are changing for employers with self-funded plans.
TPAs can’t hide behind contracts when their actions meet the definition of a fiduciary. And the case signals both the courts and the Department of Labor, who filed an amicus brief, are ready to look under the hood.
Seismic Shift
Employers now have legal precedent to:
Demand access to claims data
Challenge questionable fee structures
Hold TPAs accountable for fiduciary breaches
And stop being passive bystanders
Courts—and regulators—are no longer looking away.
Takeaways for Employers
If you take nothing else from this case, take this: Employer’s fiduciary responsibility doesn’t end with vendor selection—it begins there.
This case gives you a roadmap—and some red flags:
🚩 You can’t say, “we didn’t know.”
🚩 You must be prudent in procurement and contracting
🚩 You must be diligent in asking the right questions
You’re not just responsible for what happens—you’re responsible for what you permit.
Fiduciary Compliance Questions
Ask your TPA these questions to assess risk, uncover conflicts, and fulfill your ERISA duties.
✅ Contract Compliance Questions
Must be addressed to align with ERISA/CAA and avoid breach of fiduciary duty:
Gag Clauses
👉 Our contract must not contain any provisions that limit access to claims data or restrict disclosures. Will you confirm in writing that all gag clauses will be removed?
Claims Data Access
👉 We are entitled to line-level adjudication data (e.g., billed charges, allowed amounts, CPT codes, modifiers). Will you provide full access to this data and commit to including it in our contract?
Shared Savings and Recovery Fees
👉 You may not profit from errors your system caused. Will you prohibit fees tied to overpayments triggered by your own processes?
Audit Rights
👉 We must retain the right to audit claims and payments without restriction or delay. Will you confirm no language limits our right to full claims audits?
These are the baseline protections every employer should demand in writing.
Once addressed, go deeper.
✅ Operational Risk Questions
These questions uncover systems and subcontractors that may introduce risk or profit misalignment.
Overpayment Triggers
👉 Does your system use default-to-pay logic when codes or fields are missing—resulting in overpayment?
Third-Party Vendors
👉 Are any subcontractors (e.g., “shared savings” or payment integrity vendors) being paid from our claims flow? Who are they, and how are they compensated?
Pre-Payment Oversight
👉 Do we have the right to review claims before payment is made? If not, what options exist for real-time or pre-payment integrity checks?
These questions aren’t optional—they’re your fiduciary checklist.
This case is the strongest signal yet that ERISA’s teeth are real—and they’re pointed at both your vendors and your boardroom.
Bottom Line
If a vendor acts like a fiduciary, they can be held to fiduciary standards.
The “we’re just following the contract” defense? Dead.
Tiara Yachts gives employers a win.
This case puts TPAs—and plan sponsors—on notice.
You now have precedent, pressure, and a playbook.
Use it—or risk being the next headline.
Ready to Reclaim Control?
Better benefits start with smarter vendor alternatives—and stronger contracts.
📩 Schedule your no-risk fiduciary review today.
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📬 PAY IT FORWARD: Feel free to forward this offer to your broker, PBM, or other vendors. Don’t hesitate to tell them you will favor validated vendors as part of your modernized procurement processes. Strong compliance and better benefits begin with validation.
Don’t be a bystander. Change the status quo and reap the benefits of The Health Plan Compliance Advantage.
