Employer-sponsored health and welfare plans rely on several specialized relationships. Brokers and consultants help employers navigate the marketplace, carriers provide insurance and provider networks; third-party administrators (TPAs) perform administrative functions, and pharmacy benefit managers (PBMs) manage prescription drug benefits. Each relationship plays an important role, but together they raise a broader question for employers: Who is independently evaluating the services, compensation, performance and potential conflicts across all these relationships with the interests of the plan and its participants in mind?
For employers sponsoring health and welfare plans subject to the Employee Retirement Income Security Act of 1974 (ERISA), this is more than a management question. ERISA establishes standards of conduct for those entrusted with managing, or exercising fiduciary authority over, employee benefit plans and their assets. The U.S. Department of Labor (DOL) explains that fiduciary status depends on the functions performed and the discretion or control exercised with respect to a plan. 1Why does this matter? Fiduciary responsibility can carry personal liability. Fiduciaries who fail to meet their responsibilities may be required to restore losses resulting from the improper use of plan assets.
A Health Plan Is an Ecosystem
The complexity of today’s health plans often makes fiduciary responsibilities less evident. The DOL explains that a person using discretion in administering or managing a plan or exercising control over plan assets is a fiduciary to the extent of that discretion or control. Employers may hire outside professionals to manage some or all of a plan’s day-to-day operations, but providing services to a plan does not, but itself, determine whether a service provider is acting as in an ERISA fiduciary capacity.2 For employers, the issue therefore extends beyond understanding what each provider does. It also means understanding where fiduciary responsibility resides, and whether the plan as a whole is being viewed through an appropriate fiduciary lens.
The Fiduciary Standard Is Different
ERISA Section 404 requires fiduciaries to act solely in the interests of participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable plan expenses. Fiduciaries must also act with the care, skill, prudence and diligence that a prudent person familiar with such matters would exercise under the circumstances.3 The standard concerns substantive decision-making as well as a reasoned process.
These standards place importance not simply on the services an employer purchases, but also on the fiduciary decisions surrounding the plan. The DOL identifies hiring a service provider as a fiduciary function and states that fiduciaries are required to monitor service providers. Its guidance calls for fiduciaries to evaluate services, experience, quality, fees and third-party compensation, as well as documenting the selection and monitoring process, as well as establishing a formal review process at reasonable intervals.4 In other words, although an employer may rely extensively on outside professionals for expertise, they still retain fiduciary responsibilities of their own. This is where the distinction between receiving vendor support and carrying out the plan’s fiduciary oversight becomes important.
Greater Transparency Brings Greater Visibility
Federal law has also placed increasing emphasis on transparency in ERISA-covered health plan service-provider arrangements. For example, the Consolidated Appropriations Act, 2021 required covered providers of brokerage and consulting services to disclose specified direct and indirect compensation.5 The DOL explained that these disclosures help responsible plan fiduciaries assess the reasonableness of compensation and potential conflicts associated with indirect compensation. The Consolidated Appropriations Act, 2026 substantially expanded the categories of health plan service providers subject to these disclosures, including additional administrative and pharmacy benefit management services.
The law also established additional PBM reporting and rebate-related requirements, but those provisions have later applicability dates. Importantly, receiving a disclosure is not the same as evaluating it. Greater visibility into compensation, services and potential conflicts can provide fiduciaries with a more complete understanding of the plan’s arrangements and inform the decisions they make on the plan’s behalf. That added transparency, however, reinforces the importance of a deliberate and well-documented fiduciary process.
The Gap May Be Between Administration and Oversight
ERISA does not prescribe one universal governance structure for every group health plan. An employer can have an experienced and capable benefits team, established vendor relationships and sophisticated plan administration while still retaining responsibility for fiduciary decisions that span those relationships. The potential gap, then, is not necessarily in the services any individual provider delivers, but between the specialized roles those providers perform and the broader fiduciary process surrounding the plan.
For years, health and welfare plan management has understandably focused on benefit design, renewals, cost management and the participant experience. Those priorities remain important. The evolving challenge is ensuring that sophisticated plan administration is accompanied by an equally deliberate approach to fiduciary governance.
Strengthening the Framework
Wealthspire’s Healthcare Fiduciary Services are designed to bring an independent fiduciary perspective to an employer’s existing benefits ecosystem, complementing the professionals already supporting the plan while helping strengthen the structure, transparency and documentation surrounding fiduciary oversight. Wondering whether your healthcare fiduciary process is keeping pace with today’s challenges? Contact Wealthspire to discuss how a stronger fiduciary framework can help support a more defensible process.
Sources:
1 U.S. Department of Labor, Employee Benefits Security Administration, Understanding Your Fiduciary Responsibilities Under a Group Health Plan.
2 Id
3 Employee Retirement Income Security Act of 1974 § 404(a), 29 U.S.C. § 1104(a).
4 U.S. Department of Labor, Employee Benefits Security Administration, ERISA Fiduciary Advisor: Is Hiring a Service Provider a Fiduciary Function, and If So, What Do I Need to Do?
5U.S. Department of Labor, Employee Benefits Security Administration, Field Assistance Bulletin No. 2021-03 (Dec. 30, 2021).
