During the next several weeks, we will publish a series of articles that dive deeply into “health plan hygiene” relating to health and welfare benefit plan fiduciary issues and how employers can protect themselves in this quickly evolving area.

Section 408(b)(2) of the Employee Retirement Income Security Act of 1974 (ERISA) requires certain disclosures regarding employee benefit plan fees. When this so-called fee disclosure rule was put in place for retirement plans, it sparked litigation regarding whether the fees paid by defined contribution retirement plans for recordkeeping, plan administration, and investment management are too high. These cases have included claims of ERISA fiduciary breaches and prohibited transactions and have plagued the retirement plan industry for the last two decades.

The disclosure rule was expanded by the Consolidated Appropriations Act of 2021 to apply to welfare plans, and several notable cases have already been filed against welfare benefit plan sponsors. These recent cases have included claims that the benefits committees have been imprudent in their plan design, have overpaid for benefits, have set their premiums too high because of commissions being paid to brokers, have improperly retained rebates, and have had a conflict of interest when selecting plan partners.

Note that while there is no law requiring employers to sponsor a retirement plan for their employees, under the Affordable Care Act, certain large employers are required to offer medical insurance to full-time employees or risk a penalty from the Internal Revenue Service. As a result, employers who offer group health insurance will be at risk for claims regarding these benefits and services and cannot protect themselves by simply not offering the benefit.

Now is the time for plan fiduciaries to protect themselves from potential claims by revisiting their fiduciary practices as they apply to health and welfare plan administration.