ERISA "requires the fiduciary of a pension plan to act prudently in managing the plan's assets." Dudenhoeffer, 134 S.Ct. at 2463. See also 29 U.S.C. § 1104(a). [Footnote omitted.] [ERISA] "imposes a 'prudent person' standard by which to measure fiduciaries' investment decisions and disposition of assets" and also imposes other obligations. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 143 n. 10, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985). A fiduciary's investments are prudent if he "[h]as given appropriate consideration to those facts and circumstances that . . . are relevant to the particular investment . . . involved . . . and [h]as acted accordingly." 29 C.F.R. § 2550.404a-1(b)(1). "Appropriate consideration" includes "[a] determination by the fiduciary that the particular investment. . . is reasonably designed . . . to further the purposes of the plan, taking into consideration the risk of loss and the opportunity for gain," id. (b)(2)(i), in addition to consideration of the portfolio's diversification, liquidity, and projected return relative to the plan's funding objectives, id. (b)(2)(ii). In addition, "under trust law, a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones." Tibble v. Edison Int'l, ___ U.S. ___, 135 S.Ct. 1823, 1828-29, 191 L.Ed.2d 795 (2015). As a general matter, prudence requires "diversifying the investments of the plan so as to minimize the risk of large losses. . . ." 29 U.S.C. § 1104(a)(1)(C). Pfeil v. State Street Bank and Trust Co., 806 F. 3d 377 (6th Cir. 2015).
[A] third party service provider is an ERISA fiduciary "to the extent ... [it] exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of [the plan's] assets," or it "has any discretionary authority or discretionary responsibility in the administration of such plan." 29 U.S.C. § 1002(21)(A)(i), In short, "[a] fiduciary within the meaning of ERISA must be someone acting in the capacity of manager [or] administrator." Pegram, 530 U.S. at 222, 120 S.Ct. 2143. Humana Health Plan, Inc. v. Nguyen, 785 F. 3d 1023 (5th Cir. 2015).
"We give the term fiduciary a liberal construction in keeping with the remedial purpose of ERISA." Reich v. Lancaster, 55 F.3d 1034, 1046 (5th Cir. 1995) (internal quotation marks and alteration omitted). But the broad definition of fiduciary is still constrained in at least two ways. First, third-party service providers can serve as ERISA fiduciaries in one capacity and non-fiduciaries in another. See Pegram, 530 U.S. at 225-26, 120 S.Ct. 2143 (explaining that "persons who provide services to an ERISA plan" may operate with a conflict of interest, so long as they comply with fiduciary duties while acting in fiduciary capacity). Thus, when courts evaluate whether a party is an ERISA fiduciary, they must focus on the specific role the purported fiduciary played as relevant to the claim at hand. See id. at 226, 120 S.Ct. 2143 (holding that, "[i]n every case charging breach of ERISA fiduciary duty, ... the threshold question is ... whether that person was acting as a fiduciary... when taking the action subject to complaint"). [Footnote omitted.] Humana Health Plan, Inc. v. Nguyen, ibid.
Second, not every act that could be described as "discretionary" in the general sense makes the actor a fiduciary under ERISA. For almost forty years, the Department of Labor has maintained that "a person who performs purely ministerial functions," such as the "[p]reparation of reports concerning participants' benefits" or "[m]aking recommendations to others for decisions with respect to plan administration," is not an ERISA fiduciary. 29 C.F.R. § 2509.75-8, at D-2. [Footnote omitted.] This is because
a person who performs purely ministerial functions ... for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons ... does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan, ... and has no authority or responsibility to do so.
Id. The distinction between fiduciaries and ministerial agents applies even to "an attorney, accountant, actuary or consultant who renders legal, accounting, actuarial or consulting services to an employee benefit plan," even though these parties exercise independent, professional judgment when acting on behalf of an ERISA plan. Id. § 2509.75-5, at D-1; see also Reich, 55 F.3d at 1049 (stating that "professionals... who provide necessary services to ERISA plans" do not become fiduciaries simply by "play[ing] influential roles by virtue of the expertise that they possess or the capacities in which they act"). . . . Humana Health Plan, Inc. v. Nguyen, ibid.
[T]he common law of trusts, [ ] is the "source" of ERISA's fiduciary duty provisions. See Pegram, 530 U.S. at 224, 120 S.Ct. 2143. Under the common law of trusts, a trustee can delegate ministerial acts to third-parties. George Gleason Bogert & George Taylor Bogert, The Law of Trusts & Trustees § 555, at 114-15 (rev.2d ed.1980). If a reasonable businessperson would "employ an outside expert" to perform a given function, the courts treats those functions as ministerial. Id. at 116-17. "[E]mploy[ing] an attorney to collect choses in action running to the trust," id. § 556, at 142, is viewed as a ministerial function. See id. § 555-56. [Footnote omitted.] The trustee may entrust such duties "to realtors, lawyers, brokers, and others, not because there is a total lack of discretion and judgment involved but because such entrustment is common business practice in similar nontrust affairs." Bogert, supra, § 555, at 117. Humana Health Plan, Inc. v. Nguyen, ibid.
Under the Department of Labor's interpretations — as under the common law of trusts — the power to collect claims on behalf of the ERISA plan is not discretionary per se. There are at least two relevant factors that tip the scales between a ministerial employee and a fiduciary. First, the court must consider whether the plan administrator has set up "a framework of policies, interpretations, rules, practices and procedures" for the third-party to follow. See 29 C.F.R. § 2509.75-8, at D-2; see also Bogert, supra, § 556, at 142. If the plan administrator has established such a framework, the court must consider whether the plan administrator is actively supervising the agent's performance of the assigned task. See 29 C.F.R. § 2509.75-8, at D-2; see also Bogert, supra, § 556, at 142. One hallmark of active supervision is a requirement that the third-party submit a recommendation to the plan administrator for approval before the third-party takes further action. If the plan administrator is actively supervising the claims agent, then the fact that the agent is empowered to initiate legal action for the plan does not prove the agent is a fiduciary. See 29 C.F.R. § 2509.75-5, at D-1. Humana Health Plan, Inc. v. Nguyen, ibid.
In order to state a claim that a service provider to an ERISA-governed plan breached a fiduciary duty by charging plan participants excessive fees, a plaintiff first must plead facts demonstrating that the provider owed a fiduciary duty to those participants. Mertens v. Hewitt Assocs., 508 U.S. 248, 251, 253 (1993) (confirming that the "detailed duties and responsibilities" imposed by ERISA are "limited by their terms to fiduciaries"). According to ERISA, a party not specifically named as a fiduciary of a plan owes a fiduciary duty only "to the extent" that party (i) exercises any discretionary authority or control over management of the plan or its assets; (ii) offers "investment advice for a fee" to plan members; or (iii) has "discretionary authority" over plan "administration." 29 U.S.C. § 1002(21)(A). The phrase "to the extent" at the beginning of this provision demonstrates that fiduciary status under ERISA "is not an all-or-nothing concept." Trs. of the Graphic Commc'ns Int'l Union Upper Mw. Local 1M Health & Welfare Plan v. Bjorkedal, 516 F.3d 719, 732 (8th Cir. 2008) (quoting Darcangelo v. Verizon Commc'ns, Inc., 292 F.3d 181, 192 (4th Cir. 2002)). Therefore, courts assessing claims under ERISA must ask "whether [a] person was acting as a fiduciary . . . when taking the action subject to complaint." Pegram v. Herdrich, 530 U.S. 211, 226 (2000) (emphasis added). . . . [T]his provision requir[es] a "nexus" between the alleged basis for fiduciary responsibility and the wrongdoing alleged in the complaint. Santomenno ex rel. John Hancock Tr. v. John Hancock Life Ins. Co., 768 F.3d 284, 296 (3d Cir. 2014). McCaffree Financial Corp. v. Principal Life Insurance Company, (8th Cir. 2016).
[ ] 29 U.S.C. § 1113 governs the time for filing a breach of fiduciary duty claim arising from an alleged violation of the duties imposed on ERISA plan fiduciaries by § 1104(a)(1). Id. Section 1113, inter alia, sets out the following six-year limitations period:
No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of —
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (b) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation....
29 U.S.C. § 1113. [T]his general six-year limitation is a statute of repose. See Ranke v. Sanofi-Synthelabo, Inc., 436 F.3d 197, 205 (3d Cir.2006); Radford v. Gen. Dynamics Corp., 151 F.3d 396, 400 (5th Cir.1998). Fulghum v. Embarq Corp., 785 F. 3d 395 (10th Cir. 2015).
[S]tatutes of repose operate to "extinguish a plaintiff's cause of action whether or not the plaintiff should have discovered within that period that there was a violation or an injury." Nat'l Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., 764 F.3d 1199, 1224 (10th Cir.2014) (quotation omitted). Thus, assuming the statute of repose is applicable [ ], Plaintiffs ha[ve] six years to file their suit — the six-year period being measured from (1) the date of the last action constituting a part of the breach or (2) the latest date on which the breach could have been cured by the fiduciary. [Footnote omitted.] 29 U.S.C. § 1113.
As the Supreme Court recently instructed, in analyzing the timeliness of claims that defendants have breached their fiduciary duties under ERISA, we must consider the "nature of the fiduciary duty." Tibble v. Edison Intern., ___ U.S. ___, 135 S.Ct. 1823, 1827, 191 L.Ed.2d 795 (2015). Durand v. Hanover Ins. Group, Inc., 806 F. 3d 367 (6th Cir. 2015).
In Tibble, the Supreme Court determined that, under trust law, which illuminates the contours of an ERISA fiduciary's duties, "a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones." 135 S.Ct. at 1828-29. Accordingly, the Supreme Court held that a plaintiff can effectively allege that a defendant breached its duty of prudence under ERISA "by failing to properly monitor investments and remove imprudent ones[,] ... [and] so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely." Id. at 1829. Stargel v. SunTrust Banks, Inc., 791 F. 3d 1309 (11th Cir. 2015).
THIS CASEBOOK contains a selection of 145 U. S. Court of Appeals decisions that analyze, discuss and interpret the duties of a fiduciary under ERISA. The selection of decisions spans from 2002 to the date of publication.