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After conducting an American workplace survey on fiduciary requirements in employee benefits plans, researchers at Duke University are warning that U.S. employers with such plans are vulnerable to lawsuits. According to the survey results, many employers fail to meet even basic guidelines for performing fiduciary duties. As the researchers explain, this omission can easily result in costly lawsuits.
The Employee Retirement Income Security Act of 1974 (ERISA) requires employers with employee benefits plans, including health and retirement plans, to act as "fiduciaries." Acting in this role requires employers to perform plan oversight duties solely in the interest of plan participants. Additionally, employers must exercise "care, skill, prudence, and diligence" that a reasonable person would use in the same circumstances.
The survey received responses from 221 businesses with at least 50 employees. Despite the size of these companies, 37% reported they were not making cost comparisons for coverage with competing insurers, and approximately 33% did not solicit coverage offers from multiple insurance companies. Those failures alone, concluded researchers, likely violated ERISA.
Furthermore, although most employers review their plans each year, very few evaluate them using industry-standard performance measures. More specifically, most employers fail to measure or monitor employee experience in any meaningful way.
Employers that don't take even the basic steps to uphold their fiduciary responsibilities under ERISA are at risk for lawsuits. New federal laws and regulations have operated to expand employers' access to health plan cost data, as well as broker and advisor compensation data. Moreover, plan participants are increasingly filing class action lawsuits that accuse health plan sponsors of improperly carrying out their fiduciary duties.
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