What is an ERISA Fiduciary Duty?

There is much talk in the news about fiduciary duties. What exactly is a fiduciary duty? Generally, it is a legal obligation of one party to act in the best interest of another. It is the highest standard of care recognized by our law.

In a ERISA case, Federal Insurance Company v. American Home Assurance Company, the 11th Circuit discussed what constitutes a fiduciary duty. Mr. Mathis, a valued employee, was dying of terminal cancer and had to retire. During the exit interview, the employer was very focused on medical needs and health insurance, but did not provide information regarding conversion rights for the life insurance policy.

After Mr. Mathis died, his widow found that there was no life insurance as part of her husband’s retirement. The insurance policy could well have been converted and kept in place, and covered his terminal condition. The widow filed suit against the employer for not disclosing the conversion rights.

But did the employer’s failure to provide information involve an ERISA fiduciary duty? If it did, it would be liable under ERISA. The Court explained that ERISA fiduciary duties include duties derived from common law trust principles. The duty to disclose material information is the “core of a fiduciary’s responsibility”. The court held “a trustee is under a duty to communicate to the beneficiary material facts affecting the interests of the beneficiary which he knows that the beneficiary does not know and which the beneficiary needs to know for his protection…” quoting restatement (Second) of Trust §173.

So, when one party is in a superior position, a fiduciary duty is helpful. Employers, make sure you provide accurate, complete and truthful information. Employees may have a claim for breach of fiduciary duty, if he or she fails to receive accurate information when the “trustee” or employer/plan administrator knows of that need.

Need legal advice surrounding ERISA laws? Count on The Martin Law Group. We specialize in providing ERISA lawyer services for folks throughout Alabama and Mississippi. Get a free consultation.

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