The 7th Circuit Court of Appeals ruled that inaction might trigger liability under ERISA law, reports CFO.com.

ERISA. It’s one of those things that in-house lawyers hear about but don’t always fully understand. It’s something that employment lawyers know can be one of their greatest weapons but they don’t want to crack open the Tax Code to decipher it.

The basic rule behind ERISA is simple: Employers who offer an employee benefit plan must comply with certain rules set aside under ERISA law. These rules place upon the plan administrators the fiduciary duty of prudent management of the employee benefit plans and the duty to make adequate and appropriate disclosures.

For example, if a plan member asks for written information on the plan or his benefits under such plan, the plan administrators have to provide that information. This is just one example.

The employer had been deemed a “fiduciary” of the plan, by the Federal District Court. Given the status as a fiduciary, the Appeals court looked at the fact that the employer knew of this inefficiency and yet, didn’t act fast enough to remedy the problem.

In fact, the 7th Circuit found, there was “nothing in the record indicating that defendants ever made a decision on these matters.”

Also at issue were the high fees paid to the plan’s recordkeeper. The court held that there was a breach of fiduciary duty due to the fact that the fiduciaries failed to solicit competitive bids from other recordkeepers. While the fiduciaries argued that they relied on the advice of consultants, who advised them that their recordkeeping fees were reasonable, this argument was rejected by the court.

Related Resources

  • ERISA Case Summaries (FindLaw)
  • Labor and Employment Resources for Corporate Attorneys (FindLaw)
  • Tax Resources for Corporate Lawyers (FindLaw)

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