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ERISA Fiduciary Duties

Fri Nov 17th, 2017 on     Insurance Claims,    

The Employment Retirement Income Security Act (ERISA) was enacted with the intention of protecting the fund assets of policyholders — in qualified, covered plans — from plan mismanagement and other violations of fiduciary duty by those with authority over the plan and its assets.  Fiduciaries include trustees, administrators, and investment committee members, among various other authority figures who are tasked with management of the plan and its assets.

Fiduciary Duties

ERISA plan fiduciaries owe a number of duties (both specific and general) to the plan beneficiaries, and these duties may also vary depending on the role that the fiduciary plays within the larger context of the ERISA plan.  For example, the manager of an ERISA plan fund must disclose information relating to the investment of fund assets, and information relating to fiduciary compensation.

Specific duties required of all fiduciaries include, but are not necessarily limited, to:

Duty to Act Prudently

Fiduciaries must act prudently with regard to their management of the plan assets, and of the plan itself.  If a fiduciary lacks critical expertise, then they are required — in accordance with their duty to act prudently — to incorporate the expertise of a person or entity who does have the expertise necessary to perform the tasks at-issue.

Duty to Act in the Interest of Beneficiaries

Fiduciaries must act only in the interest of plan participants and their beneficiaries.  They may not manage the plan and its assets for any other purpose.  If some other purpose is revealed (i.e., if the fiduciary at-issue has invested assets into a personal friend’s company for the purpose of helping their friend), then they will be deemed to have acted in violation of this duty.

Duty to Follow Plan Documents

Fiduciaries must act in accordance with the plan documents, to the degree possible (as in some cases, such documents conflict with ERISA regulation).  In situations where ERISA regulation conflicts with the language of the plan documents, the fiduciary must act in accordance with applicable regulation.

Duty to Diversify Investments

Fiduciaries must diversify fund assets to the extent that diversification is a reasonably prudent strategy.  Diversification helps minimize the risk of loss, generally speaking, but not in all cases.  A poor investment strategy that just so happens to diversify fund assets may itself be a violation of the Duty to Act in the Interest of Beneficiaries and the Duty to Act Prudently.

Duty to Avoid Conflicts of Interest

Fiduciaries must not engage in transactions that involve a conflict of interest, though certain exemptions may apply, depending on the situation.  As a general rule, however, a fiduciary should avoid any and all conflicts of interest when they arise.

Liability for Violations

If you can prove that the fiduciary at-issue has violated one or more of their duties, then you may be entitled to sue the fiduciary and recover damages for any losses resulting from such violation.  Fiduciaries can generally be held personally liable for the losses they incur as a consequence of their fiduciary violations, and may also be required to return profits made through improper use of plan assets.

ERISA-covered benefit plans are governed by their own unique set of rules and regulations, and fiduciaries acting on behalf of the beneficiaries of such plans must do so in accordance with the various duties imposed on them pursuant to ERISA law.  If your ERISA-covered benefit plan has been mismanaged, thus affecting the value of the fund (and as a consequence, affecting the value of your benefits), then you may be entitled to sue and recover damages.

Ver Ploeg & Lumpkin is an insurance litigation firm based out of Miami and Orlando.  Our attorneys have represented policyholders throughout the state of Florida for over 22 years, helping clients obtain full and adequate benefits — and when necessary, litigating against the insurer on their behalf — from insurers.  We have a long track record of success in litigating claims against fiduciaries and insurers involved in ERISA-covered plans, and are committed to personalized representation through every phase of litigation.

Call 305-577-3996 to speak with an experienced Miami insurance litigation lawyer here at Ver Ploeg & Lumpkin today.  During your initial consultation, we will assess your ERISA claim(s) and help you develop a strategic roadmap moving forward.

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