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Welcome to the Fiduciary Jungle!

By: Ron E. Peck, Esq.

I am tired; so very tired.  Is it my two year old son, waking up in the middle of the night and begging to play with his toy choo choo?  No.  It’s the posts and articles written by individuals such as Dave Chase, and our own Adam Russo, which keep me up.  In particular, it’s their entries discussing fiduciary obligations, and breach of duty.  For some time now, we’ve been hearing about employees suing employers over mismanagement of 401(K) and pension plans.  These fiduciaries are being accused, by the employees of wasting the plan’s (aka their) money on less-than-advisable investments.  From Lorenz v. Safeway, Inc., 241 F. Supp. 3d 1005, 1011 (N.D. Cal. 2017) to McCorvey v. Nordstrom, Inc. filed in the California Central District Court on November 6, 2017, this year has been replete with examples of employees holding fiduciaries’ feet to the fire when it comes to prudently managing plan assets.

In each situation, the fiduciary invests the plan’s money, or uses the plan’s money, to purchase less than stellar investments or excessive fees.  The plaintiffs in these cases have literally said that their plan fiduciary used plan assets to pay one fee to one vendor, when another vendor could have done the same (or better) job for half the price.  Yes – they are talking about 401(K) fund management… but you and I both know that if this same plaintiff (and their attorney) knew self-funded health plans are paying one facility one-thousand-times more to do something that another facility would have done as well for thousands less … that these benefit plans are overpaying claims in error and not seeking to recoup refunds … that these benefit plans are paying claims for which a third party is responsible and are not seeking reimbursement … that these benefit plans are accepting insignificant discounts on inflated provider charges – simply to enjoy the peace and quiet that comes from using a wrap network for out of network claims … if plan beneficiaries (investors) knew about these and other ways their plan fiduciaries waste and abuse plan funds, I’m confident a similar lawsuit would soon follow.

We are all very lucky that the brokers, administrators, and fiduciaries managing 401(K) and pension plans were the first target, as it serves as a warning for those of us in the health benefits arena to shape up and take action now, before it’s too late.  The writing is on the wall; what will you do about it?




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