ERISA Fiduciary Duties
| Duty | Description | Health Plan Application |
|---|---|---|
| Prudent expert | Act with the care, skill, and diligence of a prudent expert | Monitor plan costs; evaluate vendor performance; benchmark against peers |
| Loyalty | Act solely in the interest of plan participants | Avoid conflicts of interest; disclose compensation |
| Diversification | Diversify plan investments | Less relevant for health plans |
| Follow plan documents | Act in accordance with plan documents | Administer plan as written; update documents when needed |
The Johnson & Johnson Case
The Johnson & Johnson case (2024) established that employers can be sued for excessive health plan costs. The plaintiffs alleged that J&J's health plan paid excessive prices for prescription drugs — prices that a prudent fiduciary would not have paid. The case is a watershed moment for health plan fiduciary liability — it signals that plan sponsors must actively monitor and manage plan costs.
The Evolving Standard
IQ Insight
The fiduciary duty standard for health plans is evolving rapidly. Courts are increasingly applying the same rigorous standard to health plan fiduciaries that has long applied to retirement plan fiduciaries. Plan sponsors who passively accept carrier and TPA recommendations without independent evaluation face growing fiduciary liability. Active, documented fiduciary oversight is now essential.