January 30, 2020

Since the passage of the Employee Retirement Income Security Act of 1974 (ERISA), the Department of Labor (DOL) and private litigants have focused mainly on pension plans and more recently, 401(k) plans. But ERISA was enacted to protect the interests of employees and their beneficiaries in all employee benefit plans, including health plans. 

Recently, DOL has shown a heightened interest in investigating health plans governed by ERISA for compliance. ERISA fee litigation is also shifting into the health plan arena, and litigation accusing health plan fiduciaries of paying or charging excessive or hidden fees is becoming more common. Investigation of self-funded health benefit plans and the fees charged by the third-party administrators (TPAs) that serve them is one of the focus areas.

Recent DOL enforcement actions have focused on TPAs, but fiduciaries have an obligation to understand the fees paid to the TPAs they hire and to ensure that such fees are reasonable. One case discussed in this article, Acosta v. Chimes, should serve as a warning to ERISA plan fiduciaries, because in that case DOL pursued litigation against the plan fiduciaries for paying too much in fees to the TPA engaged to administer claims under the plan. 

For these reasons, even many of the cases discussed in this article directed actions against the TPAs for charging excessive and/or hidden fees, such cases could just as easily be brought against plan fiduciaries. Therefore, it is critical for ERISA fiduciaries, particularly Taft-Hartley plan trustees and those responsible for implementing employer-sponsored plans, to understand their obligations under ERISA when it comes to retaining and monitoring TPAs.

The complete article can be viewed here.