ERISA And Fiduciary Status

Here is a read for lawyers handling ERISA cases.  It is an opinion from the Southern District, Houston Division.  The opinion is styled, Keith v. Metropolitan Life Insurance Company.

For the facts in this case, read the opinion.  This writing is a discussion of the law as it relates to fiduciaries in ERISA cases.

The threshold question in an ERISA claim for breach of fiduciary duty is not whether the actions of some person employed to provide services under a plan adversely affected a plan beneficiary’s interest, but whether that person was acting as a fiduciary (that is, was performing a fiduciary function) when taking the action subject to complaint.  The issue of ERISA fiduciary status is a mixed question of fact and law.  Under ERISA, one is a fiduciary under 29 U.S.C., Section 1002(21)(A) to the extent that:

(1) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

In short, a fiduciary within the meaning of ERISA must be someone acting in the capacity of manager or administrator.  Merely performing administrative duties as required by the plan is not a fiduciary function.

ERISA section 404(a) specifies that a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and their beneficiaries, and for the exclusive purpose of: (i) providing benefits to participants; and (ii) defraying reasonable expenses of administrating the plan.  This is stated in 29 U.S.C., Section 1104(a)(1)(A).  Such duties shall be discharged with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.  This is stated in Section 1104(a)(1)(B).  Other than including these general dictates, ERISA does not expressly enumerate the particular duties of a fiduciary, but rather relies on the common law of trusts to define the general scope of a fiduciary’s responsibilities.  A trustee has a duty in dealing with a beneficiary to deal fairly and to communicate to the beneficiary all material facts the trustee knows or should know in connection with the matter.

Fiduciaries who gratuitously communicate with plan participants may owe a duty to “do so in a manner calculated to avoid confusion and misunderstanding,
whether by omission or commission.  Fiduciaries have not only a negative duty not to misinform, but also an affirmative duty to inform when the trustee knows that silence might be harmful.  If a fiduciary breaches his duty, the plaintiff must prove that the breach caused the plaintiff’s injury in order to be entitled to equitable relief.
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