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The Wagner Law Group Description 

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 

 

Established in 1996, The Wagner Law Group has 23 attorneys engaged exclusively in employee benefits, estate planning and employment law. Seven of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.

 

 

 

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Massachusetts Office 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110


Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

San Francisco Office

Tel: (415) 625-0002

Fax: (415) 358-8300

315 Montgomery Street

Suite 904

San Francisco, CA 94104

 

Illinois Office

Tel: (847) 250-1365

Fax: (847) 250-1367

414 West Deerpath Road
Lake Forest, IL  60045  

 

www.wagnerlawgroup.com

 

 

 

 

May 22, 2014

 

 State and Federal Law Alert

 

 

 

Court Affirms $5 Million Award Against TPA for Breaching ERISA Fiduciary Duty 

 

 

 

 

The Sixth Circuit Court of Appeals has ruled in Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan that a third party administrator ("TPA") functioned as a fiduciary for an ERISA-covered health plan and then breached its fiduciary duties by failing to disclose its fees to the employer.

 

Background. The defendant served as TPA for the plaintiff-employer's self-funded health plan. It charged the plaintiff a monthly fee in exchange for administering employee claims and offering access to its provider network.

 

Later, the defendant began to retain additional, undisclosed fees from amounts transferred to it by the plaintiff to administer the claims payments. The plaintiff learned of the undisclosed fees several years later and sued, claiming that the defendant breached its ERISA fiduciary duties by inflating plan charges with hidden fees.

 

Sixth Circuit's Decision. The defendant argued that it did not become an ERISA fiduciary merely because the contract gave it the unilateral right to retain funds as compensation for plan services. The Sixth Circuit rejected this argument, saying that a party is a fiduciary when a contract gives it discretionary authority to retain plan assets.

 

The defendant next contended that the funds used to pay the disputed fees were corporate assets and not plan assets subject to ERISA. (Note: The funds sent by the plaintiff to the defendant were a combination of the plaintiff's general assets and plan participant contributions and did not come from a formal trust fund or separate bank account.) The Sixth Circuit rejected this notion, ruling that the defendant functioned as an ERISA fiduciary by holding plan assets associated with the plaintiff's health plan. Applicable DOL guidance provides that welfare plan assets generally include property in which the plan has a "beneficial property interest." The Sixth Circuit noted that a variety of factors established that this property interest extended to plan funds held by the defendant, including: 

  • An SPD provision indicating that the plaintiff was not the direct payer of benefits;
  • Additional SPD language requiring participants to submit claims to the defendant, which held the funds and maintained discretionary authority to pay claims; and
  • The defendant's submission to the plaintiff of data for inclusion in the health plan's Form 5500. 

 

 

 

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Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues is not intended or written by The Wagner Law Group to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding penalties that may be imposed on you or any other person under the Internal Revenue Code.

 

This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.