Opinion ID: 618491
Heading Depth: 2
Heading Rank: 1

Heading: Was Delegation Authorized?

Text: A plan fiduciary may delegate its fiduciary responsibilities to a third party only where the plan expressly provide[s] for procedures for such a delegation. 29 U.S.C. § 1105(c)(1). As explained in Wallace v. Johnson & Johnson, 585 F.3d 11, 15 (1st Cir. 2009), our court has placed little emphasis on the statute's reference to delegation procedures. That is, we do not require that a plan establish any procedures governing delegation beyond a basic grant of the authority to delegate itself. See id. (Our own cases treat delegation 'authority' and delegation 'procedures' as more or less the same thing . . . .). However, the statute's reference to expressly provid[ing] delegation procedures means that such a grant of authority to delegate must be clearly stated. This is consonant both with the requirement that the initial grant of discretionary authority by a plan be unambiguous, see Terry v. Bayer Corp., 145 F.3d 28, 37 (1st Cir. 1998); Rodriguez-Abreu, 986 F.2d at 583, and with our case law examining plan language granting authority to delegate. In Wallace, we found a valid delegation of discretionary authority where it was clear that the benefits plan at issue purport[ed] to allow delegation. 585 F.3d at 14. The relevant language of the plan stated that the fiduciary may '[d]elegate its authority established' by the Plan, 'designate persons to assist in carrying out fiduciary duties,' 'allocate responsibility for the -20- operation and administration' of the Plan, and '[a]ppoint persons or committees to assist it to perform its duties' under the Plan. Id. at 14-15. We reached the same conclusion in Terry, where the plan stated that '[t]he Company may appoint one or more individuals to act on its behalf, in which case every reference herein made to the Company shall be deemed to mean or include the individuals as to matters within their jurisdiction.' 145 F.3d at 37-38. In each of these cases, the plan language was unambiguous and unqualified in its grant of authority to delegate. Here, in contrast, the Plan cannot be read to authorize a delegation of plenary administrative authority over the Plan to Partners. The most relevant provision of the Plan document, and the one emphasized by the Plan,8 reads as follows: 6.3. Employment of Agents. The Hospital may employ agents, including but not limited to, a Claims Processor, accountants, attorneys or actuaries to perform such services and duties in connection with the administration of the Plan as it may direct. . . . The Hospital shall be fully protected in acting upon the 8 The Plan contains another potentially relevant provision, Article 6.4, which provides authority for the Hospital to delegate to the Claims Processor responsibility for certifying the information and amount necessary for the proper payment of claims from the Fund under the provisions of the Plan. The Plan does not contend, however, that the Hospital's authority to delegate its discretionary authority to Partners arises from this provision. This is because the delegation authorized in Article 6.4 is a limited one relating to claims processing duties, and, as discussed below, the authority that may be delegated to the Claims Processor under the Plan falls short of the sort of administrative authority that will trigger deferential review. -21- advice of any such agent, in whole or in part . . . . Unlike the plan language in Terry and Wallace, the provision here authorizes no complete devolution of the discretionary authority granted to the Hospital under Article 6.1 of the Plan. Rather, Article 6.3 allows the Hospital to employ agents, often referred to as service providers in ERISA parlance, whose activities it may direct, to assist with the day-to-day operation of the Plan and to advise the Hospital in carrying out the fiduciary duties assigned to it in Article 6.1. In Terry, in the course of determining whether a third-party claims processor could be sued as a fiduciary under ERISA for its role in denying the claimant benefits, we drew a sharp distinction between these types of third party service provider[s], on the one hand, and the plan administrator and fiduciaries, on the other. 145 F.3d at 35-36. The reference to a Claims Processor as one of the agents the Hospital may employ reflects the limited nature of the delegation authorized by Article 6.3, and, critically, that it does not include the ultimate authority to determine eligibility for benefits or to construe the terms of the plan -- the authority that triggers deferential review. Firestone, 489 U.S. at 115. A claims processor generally makes the initial determination on a benefits claim and may handle the first level of appeals, but another entity is usually responsible for making a final -22- determination on appeal.9 In the typical instance, we have thus noted that an entity which merely processes claims 'is not a fiduciary because such person does not have discretionary authority or discretionary control respecting management of the plan.' Terry, 145 F.3d at 35-36 (quoting 29 C.F.R. § 2509.75-8, D-2 (1997)). Such is plainly the case under the Plan. Article 6.1 sets the Hospital's authority side-by-side with the Claims Processor's. It makes clear that, though [t]he processing of claims and calculation of benefits shall be the sole responsibility of the Claims Processor, it is the Hospital that has full discretionary authority to administer the Plan, including without limitation the authority to determine eligibility for benefits, construe the terms and conditions of the Plan, and resolve disputes as to the interpretation of the Plan documents. Accordingly, I read Article 6.3 to authorize delegation of administrative functions short of the Hospital's core authority to determine eligibility for benefits and construe the terms and conditions of the Plan.10 At a minimum, if this provision were 9 Here, for instance, Liberty (acting as claims processor) made the initial benefits determination and processed Maher's first appeal, but, upon Maher's second and final appeal, Partners made the ultimate determination to deny. 10 In relying on Pettaway v. Teachers Insurance and Annuity Ass'n of America, 644 F.3d 427 (D.C. Cir. 2011), for the proposition that decisional authority to determine benefits can be inferred from plan language, the majority fails to take seriously the clear statement standard in our case law. Whether or not the language in Pettaway would meet that standard, the language here -23- intended to permit the delegation of the totality of the Hospital's discretionary authority, it lacks the requisite clarity. Cf. Terry, 145 F.3d at 37 ([T]he grant of discretionary authority must be clear.). I thus conclude that Article 6.3 did not authorize the Hospital's delegation of discretionary authority to Partners. However, as discussed below, even if the Plan permitted such delegation, the evidence that a delegation took place is inadequate. does not. The Pettaway court described the relevant plan provisions as follows: As stated in the Plan Document, the Academy shall be the Plan Administrator and the 'Named Fiduciary' with the absolute power, authority and discretion to administer the [Academy] Plan. Plan Document at 3.1, 3.2. All interpretations of the Plan, and questions concerning its administration and application, shall be determined by the Academy, which has the authority to appoint such accountants, counsel, specialists, and other persons as it deems necessary or desirable in connection with the administration of the Plan. [Plan Document] at 3.2. Pettaway, 644 F.3d at 434. Thus, unlike the MGH Plan, delegation under the plan in Pettaway was not limited to agents whom the administrator would direct. See supra pp. 21-22. Instead, the Pettaway administrator had broad authority to delegate administrative responsibility to others whenever such a transfer of duties was deem[ed] necessary or desirable. The limited language in the MGH Plan renders irrelevant the majority's observation that lawyers, accountants and actuaries may be assigned fiduciary duties. The issue here is not whether such professionals are considered fiduciaries, but whether this Plan clearly endorsed delegation of the authority to make final benefits determinations. -24-