When employers think about fiduciary responsibility, retirement plans often come to mind first. But recent developments make it clear that fiduciary duties also matter—sometimes significantly—when it comes to employer-sponsored health and welfare plans.

Federal law requires employers that sponsor ERISA-covered benefit plans to act in the best interests of plan participants and beneficiaries. While many employers rely on insurance carriers, TPAs, PBMs, and other vendors to handle day-to-day administration, the responsibility for oversight ultimately remains with the employer.

Why Fiduciary Duties Are Getting More Attention

Over the past several years, fiduciary enforcement has expanded beyond retirement plans and into the health and welfare space. Courts, regulators, and plaintiffs’ firms are increasingly focusing on whether employers have taken reasonable steps to select, monitor, and oversee the vendors that operate their benefit plans.

This scrutiny is no longer limited to very large employers or complex medical plans. Recent litigation has also targeted voluntary benefits, such as accident, critical illness, and hospital indemnity coverage—benefits many employers assume fall outside ERISA’s reach. These cases challenge that assumption and emphasize the importance of process, documentation, and oversight.

What It Means to Be a Fiduciary

In simple terms, fiduciary responsibility is about prudence and loyalty, not perfection. Employers act as fiduciaries when they make decisions about plan design, vendor selection, fees, and administration. Fiduciary duties focus on how decisions are made—whether employers act carefully, use appropriate information, and document their reasoning—not solely on outcomes.

Importantly, fiduciary status is based on functions performed, not job titles. An employer may delegate administrative tasks to vendors, but it cannot delegate away fiduciary responsibility for selecting and monitoring those vendors.

Common Areas of Fiduciary Risk

Based on recent enforcement activity and litigation trends, fiduciary risk most often arises from:

• Vendor selection and oversight, including the lack of competitive review or benchmarking
• Fee transparency, particularly where participant-paid premiums or commissions are involved
• Inadequate documentation, such as missing records showing how or why decisions were made
• Plan administration failures, including eligibility errors or plan terms not being followed in practice

These issues do not necessarily indicate wrongdoing, but they can create exposure if employers cannot demonstrate a thoughtful and consistent process.

Practical Steps Employers Can Take

Employers do not need to overhaul their benefit programs to reduce fiduciary risk. Many effective steps are procedural and administrative, such as:

• Establishing a benefits committee or defined decision-making structure
• Documenting vendor selection, renewals, and major plan decisions
• Periodically reviewing vendor performance, fees, and service levels
• Confirming plan documents are current and administered consistently

These practices help demonstrate that benefit decisions are made prudently and in the best interests of employees.

Final Thought

Fiduciary responsibility is not about avoiding all risk—it is about showing that employers are paying attention, asking appropriate questions, and acting thoughtfully on behalf of their workforce. As fiduciary expectations for health plans continue to evolve, employers that focus on process, documentation, and oversight will be better positioned to respond to regulatory inquiries or legal challenges.

If you have questions about fiduciary responsibilities related to your benefit plans, your INSURICA team is available to help guide you through best practices and available resources.

This article is for informational purposes only and does not constitute legal advice. Employers should consult legal counsel or a qualified advisor regarding fiduciary obligations and compliance.