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TPAs Taking on Fiduciary Duty?

TPAs often find themselves in an odd debate with clients…often because a consultant or broker wants to look smart and has thrown in a new twist. The request is usually either the client wants to shift all fiduciary duty & liability onto the TPA, or the RFP asks whether the TPAs is "willing to accept fiduciary duty". A member faced with this kind of question asked how to "politely" inform the client that such determination of who is viewed as having all or some fiduciary duty is not in the hands of the plan sponsor or the TPA. Here was our suggestion:

"The ERISA law and Department of Labor are the ones who decide who and what is covered by fiduciary duty, case by case, based on the facts & circumstances of each situation. The entity named in the plan sdocument as the official Administrator (usually the plan sponsor or Trustee) is always the official and ultimate Fiduciary, and that can not be delegated away. The Department of Labor can apply some level of fiduciary duty to TPAs or any other entity or person who has the power to exercise any level of discretionary authority over the plan (such as deciding which claims are payable within the normal day-to-day duties under the general guidance to process claims for the plan. Ironically, sometimes fiduciary duty for TPAs arises if the plan sponsor directs the TPA (or any other plan service provider) to do something illegal or imprudent. If the TPA follows the orders of the Plan Sponsor (official Fiduciary), and does what he knows is illegal or imprudent, then the TPA acquires fiduciary liability, even though he was just following orders. So, no one but the Department of Labor has the power to assign how much fiduciary duty a TPA or other entity serving the plan may have. Since these decisions tend to be after-the-fact, and based on specific facts & circumstance, TPAs operate on the assumption that any and all activities relevant to the operations of the plan might be later viewed as being at least partially fiduciary." There are longer pieces and pieces which can be printed out for clients on the SPBA members' only website in the category "ERISA, Fiduciary & Types of Plans". Also remember that plans that are sponsored by governmental employers or religious group employers are not subject to ERISA and thus not to its formal fiduciary duty.