The U.S. District Court for the District of Massachusetts, in Shea v. Unum Life Ins. Co, has ruled that a claims processor is not an ERISA fiduciary because it does not have discretionary powers over the plan.
Law. In general, a fiduciary includes any individual or entity that has or exercises discretionary authority or control over the management or administration of a plan, or the disposition of plan assets. Fiduciaries do not include individuals who only perform ministerial functions and who do not have the power or authority to make decisions with respect to plan policy, interpretation, practices, or procedures.
Facts. A participant in a self-funded long term disability plan was denied benefits and sued the plan, her employer, and the insurance company (the “insurer”) which performed certain claims procedures under an administrative services agreement (“ASA”). The insurer asked for dismissal, claiming it was not a plan fiduciary and that ERISA does not authorize actions against non-fiduciaries of an ERISA plan.
According to the ASA, the insurer provided “nondiscretionary, non-fiduciary administrative services relative to the receipt, management, record keeping, and processing of Claims under the Plan.” It also provided that upon receiving a claim, the insurer was required to promptly process the claim consistent with the employer’s general or specific direction and the employer’s interpretation of the plan. It then stated that, “Unless and until [the employer] exercises its right to object to these recommendations [the employer] will pay Claims in accordance with [the insurer’s] recommendations.”
District Court. The court began by noting that ERISA contemplates actions against an employee benefit plan and the plan’s fiduciaries. With narrow exceptions, however, ERISA does not authorize actions against non-fiduciaries of an ERISA plan.
Under ERISA, a person is a functional fiduciary with respect to a plan to the extent that the person “exercises any discretionary authority or discretionary control respecting management of such plan” or “has any discretionary authority or discretionary responsibility in the administration of such plan.”
The court explained that the insurer’s permitted actions under the ASA, without more evidence of the insurer’s exercising discretion in actual practice, amounted to merely “nondiscretionary administrative functions,” which were insufficient to confer fiduciary status. According to the court, functions such as “nondiscretionary administrative functions including the application of rules determining eligibility for participation or benefits, the calculation of benefits, and the processing of claims do not create fiduciary authority.”
The court therefore dismissed the insurer from the action but permitted the lawsuit to continue against the other parties.