Opinion ID: 3033243
Heading Depth: 3
Heading Rank: 1

Heading: The Fiduciary Purpose of ERISA

Text: [5] “ERISA seeks ‘to safeguard the well-being and security of working men and women and to apprise them of their rights and obligations under any employee benefit plan.’ ” Blau, 748 F.2d at 1356 (quoting Donovan v. Dillingham, 688 F.2d 1367, 1372 (11th Cir. 1982)). “[T]he evils against which ERISA was enacted to guard [are] insecurity, lack of knowledge, and inability to police plan administration . . . .” Id. ERISA guards against these evils and protects employee benefit plans by setting forth certain fiduciary duties applicable to the management of both employee welfare and benefit plans.7 7 When enacting ERISA, Congress invoked and incorporated the common law of trusts, which had governed most benefit plans before ERISA, to broadly define the general scope of an ERISA administrator’s fiduciary duty. See Cent. States, Se. & Sw. Area Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 570 (1985) (“[R]ather than explicitly enumerating all of the powers and duties of trustees and other fiduciaries, Congress invoked the common law of trusts to define the general scope of their authority and responsibility.”); Varity Corp. v. Howe, 516 U.S. 489, 497 (1996) (“we believe that the law of trusts often will inform, but will not necessarily determine the outcome of, an effort to interpret ERISA’s fiduciary duties. In some instances, trust law will offer only a starting point, after which courts must go on to ask whether, or to what extent, the language of the statute, its structure, or its purposes require departing from common-law trust requirements.”) (emphases added); Restatement (Second) of Trusts § 170 (1992) (imposing a duty of loyalty on trustees to “administer the trust solely in the interest of the beneficiaries” and imposing “a duty to deal fairly and to communicate to the beneficiary all material facts the trustee knows or should know in connection with the transaction”). 10906 PERALTA v. HISPANIC BUSINESS See generally 29 U.S.C. §§ 1101-1104. The statute places a core obligation on an ERISA fiduciary to “discharge [its] duties with respect to a plan solely in the interest of the participants and beneficiaries.” Id. § 1104(a)(1);8 see also Varity, 516 U.S. at 506; Bins v. Exxon Co. U.S.A., 220 F.3d 1042, 1048 (9th Cir. 2000) (en banc). [6] Citing § 1104(a)(1), the Eleventh Circuit has concluded that “[p]roviding notice of the discontinuation or suspension of coverage is a fiduciary responsibility” and that “employees are entitled to prompt notice of the suspension of their plan coverage.” Willett v. Blue Cross & Blue Shield of Alabama, 953 F.2d 1335, 1340 (11th Cir. 1992); see id. at 1341-42 (holding that delegation of duty to notify individuals of suspension of coverage does not relieve fiduciary of all liability for breach of that duty); accord Presley v. Blue Cross-Blue Shield of Alabama, 744 F. Supp. 1051, 1058 (N.D. Ala. 1990) (recognizing that insurer could delegate fiduciary duty of notifying plan participants of termination of coverage, but that its liability for breach could still exist); see also Rucker v. Pacific FM, Inc., 806 F. Supp. 1453, 1459 (N.D. Cal. 1992) (recognizing duty of prompt notification of LTD policy cancellation).9 8 Included directly in the statute are congressional findings and a declaration of policy stressing the need to protect employee interests. See id. § 1001(a) (declaring, among other things, that (1) “the continued wellbeing and security of millions of employees and their dependants are directly affected by these plans;” (2) due to the “lack of employee information and adequate safeguards concerning their operation [employee welfare and benefit plans], it is desirable in the interests of employees and their beneficiaries . . . that disclosure be made and safeguards be provided with respect to the establishment, operation, and administration of such plans;” and (3) it was desirable “that minimum standards be provided assuring the equitable character of such plans”). 9 In dicta, the Third Circuit suggested that the only fiduciary duty regarding termination notification is found in 29 U.S.C. § 1024(b)(1). Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1168, n.15 (3rd Cir. 1990). The court also opined that Congress may have sought to minimize disincentives to creating ERISA benefit plans by restricting liability for reporting and disclosure violations. Id. at 1170. There is little burden, however, in advising employees when a plan is terminated, and routine reporting and disclosure requirements would seem to be of a different nature from complete termination, as is discussed in the following section. PERALTA v. HISPANIC BUSINESS 10907 [7] We agree with the Eleventh Circuit that the broad fiduciary responsibilities imposed by ERISA require a plan administrator to provide timely notification to employees of termination of their benefits. To conclude otherwise would conflict with ERISA’s purpose to safeguard the well-being of employees and apprise them of their rights under an ERISA plan.