401(k) Specialist Issue 2 - 2021 - 35

401(k) PRACTICE MANAGEMENT
" There is going to be, I believe, a veritable
tidal wave when people understand that
the fiduciary responsibilities, liabilities and
obligations are equally applicable in the
wild west of welfare benefit plans, as they
are in, for example, 401(k) plans. "
- Marcia Wagner
ee welfare benefit plans under ERISA as
they are to employee pension benefit plans, "
Wager added.
She noted two trust law components,
specifically, when describing the healthcare
plan sponsor's fiduciary duty to disclose
material information to participants.
" Plan participants must be provided with
material information that will allow them to
make informed decisions ...this same point
was made in the preamble of the recently
issued final regulation on healthcare transparency, "
she explained.
Second, decisions should be made with
cost-consciousness is mind; a fiduciary cannot
waste a beneficiary's money, and they
are obligated to minimize costs.
" The determination of an appropriate
medical plan is a different type of investment
decision than investing in a 401(k)
plan, but the fiduciary principles are applicable, "
she said, reinforcing the similarities
between the two.
In an echo of 408(b)(2), she said that in
most-if not all-disclosure requirements
under ERISA, " the information should be
provided in a manner that is calculated to
be understood by the average plan participant. "
In other words, plain, understandable,
and straightforward.
She emphasized that information, technology,
and the common law of trusts are
not static, so fiduciary duties, therefore,
cannot be either.
" Articulation of the ERISA fiduciary
duty in the context of healthcare plans may
be new, but the duty to disclose information
to participants of which they are unaware
in order to allow them to make informed,
cost-conscious decisions is not. "
Outsourcing Obstacles
In addition to transparency in pricing and
408(b)(2)-style disclosures, similarities exist
in questions surrounding the outsourcing of
fiduciary responsibilities, the service providers
covered, and the complexities it entails.
It's something that's made 3(38), 3(21), and
3(16) extremely topical in the retirement
plan space recently, and Wagner sees a similar
path for healthcare plan fiduciaries.
" Who is a covered service provider? "
she rhetorically asked. " At the end of the
day, this all comes down to the employer's
responsibility, but the employer can clearly
be subcontracting this to the broker or insurance
company itself, but it's evolving. "
The fiduciary responsibility principles are
on the plan sponsor, or the so-called named
fiduciary, she emphasized. Still, whomever
the sponsor subcontracts to, at least initially,
will argue they are not a fiduciary.
" The question will be-how does the law
evolve, and will it evolve to say brokers are in
fact fiduciaries? The industry created a huge
wall between welfare benefits and pension
benefit arrangements. They're all employee
benefit arrangements and all subject to the
same fiduciary principles. That is going to lead
to the changes that you saw in the 401(k)-arena
coming [to healthcare plans], in a more
tightened timeframe, because of technological
changes to the welfare benefit world. "
Regulatory Road Ahead
Greenleaf, for her part, reflected on the
past when considering healthcare brokers
and sponsors fiduciary future.
Noting the traditional lack of awareness,
she said she would routinely ask 401(k)
sponsors what they were paying for the
plan. The answer, inevitably, would often be,
" It's free. "
" I would chuckle because last time I
looked, nobody works for free, " Greenleaf
related. " There was a total lack of understanding
of the services provided and
the fees charged. I think with these new
transparency regs and the CAA, we're going
to have to disclose more data around what is
made on the healthcare plan and its reasonableness
given the services provided. "
As with retirement plans, that's not a bad
thing, and she called it an eye-opener for
plan sponsors who have yet to take a close
look at the actual costs. If it's an opportunity
to save additional dollars and help their
employees do so too, even better.
" Kudos to the new regulations, although
I'm surprised I'm saying that, " Greenleaf
concluded. " If we're able to design plans
that allow them to reduce their costs and
put that money into health savings accounts
that they can use throughout their lifetime,
we will all be better off. "
In Their
Own Words
" At this point in time, we believe
that sponsors of group health
plans have a clear ERISA fiduciary
duty to provide information to
plan participants to ensure they
can make informed decisions in
their own best interest. Failure to
provide that information should
be viewed as a breach of the
sponsor's fiduciary duties and
could expose the sponsor to
significant liability. "
- The Wagner Law Group,
Disclosure to Welfare Plan
Participants: A Fiduciary Duty.
ISSUE 2 2021 | 401kSpecialist.com
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401(k) Specialist Issue 2 - 2021

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