ERISA Fiduciary Duties

by Roxie Hixson · Feb 11, 2026

Recent class action lawsuits have put a renewed spotlight on employers’ ERISA fiduciary responsibilities when sponsoring health and welfare plans. Employers that offer ERISA-covered benefits are expected to maintain sound governance practices, make informed decisions, and actively oversee vendors and fees, while also ensuring plan terms are followed and communications are clear and accurate. As fiduciary litigation continues to evolve, these cases serve as a timely reminder that employers must play an active role in managing their benefit plans prudently and in the best interests of plan participants.

ERISA Fiduciary Duty Basics

ERISA §404 outlines the duties of a plan fiduciary and requires fiduciaries to perform their duties:

solely in the interests of participants and beneficiaries;
for the exclusive purpose of providing plan benefits, or for defraying reasonable expenses of plan administration;
with the care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use; and
in accordance with the documents and the instruments governing the plan insofar as those documents and instruments are consistent with ERISA.

ERISA fiduciary duties include, among other things, administering the plan in accordance with plan documentation, including eligibility rules and claims procedures; providing participant disclosures; choosing and monitoring vendors to help administer the plan; and properly handling plan assets. See further guidance from the Department of Labor’s publication “Understanding Your Fiduciary Responsibilities Under a Group Health Plan.”

It is not always clear whether a particular action or decision will rise to the level of a fiduciary breach. Rather than focusing on any single choice in isolation, the full set of facts and circumstances and how the plan is managed overall should be considered. For example, selecting a vendor that is not the lowest-cost option is not, by itself, a breach of fiduciary duty if the vendor provides additional value or services that benefit the plan. Similarly, conducting appropriate due diligence and documenting the decision-making process can help demonstrate that a decision was reasonable and prudent, even if the outcome ultimately differs from what was expected.

Who is a Plan Fiduciary?

Employer-sponsored plans subject to ERISA should have a named fiduciary. Typically, this is an individual, or sometimes a committee of people, working for the plan sponsor with decision-making authority. However, fiduciary status can also flow from the plan functions performed by a person who is not otherwise named as a fiduciary. It is not a person’s title, office, or other formal designation that determines fiduciary status. Specifically, under ERISA §3(21), a person is a “fiduciary” with respect to an employee benefit plan to the extent that the person:

exercises any discretionary authority or discretionary control respecting management of the plan or exercises any authority or control respecting management or disposition of plan assets;
renders investment advice for a fee or for any other compensation, direct or indirect, or has any authority or any responsibility to do so; or
has discretionary authority or discretionary responsibility in the administration of the plan.

Employer Responsibilities

Employer plan sponsors have an obligation to operate their ERISA-covered health and welfare plans in compliance with applicable legal requirements and to oversee plan administration prudently. This includes clearly documenting plan terms and administrative procedures, communicating those terms to participants, and following established procedures in practice. While insurance carriers and vendors play a significant role—particularly for fully-insured plans—the employer retains fiduciary responsibility for oversight of the plan.

One of an employer’s most important responsibilities is to do their due diligence when selecting plan vendors and then to monitor the actions of those vendors. Employers must also ensure that vendors are paid only reasonable and necessary fees. Recent laws and regulations—such as the Consolidated Appropriations Act, 2021 (CAA) and the Transparency in Coverage (TiC) rules—have increased the importance of effective vendor oversight. Many of these requirements cannot be satisfied without vendor cooperation. For example, prescription drug data collection (RxDC reporting) and non-quantitative treatment limitation (NQTL) comparative analyses often rely on information held by carriers, TPAs, or PBMs. Although employers may delegate administrative functions to third-party vendors, fiduciary responsibility for selecting and monitoring those vendors remains with the employer as plan sponsor.

As greater pricing, fee, and performance information becomes available to employers and the public, employers may be expected to consider and appropriately respond to that information when making plan decisions. While increased transparency can benefit both employers and participants, it may also heighten fiduciary expectations around monitoring costs, vendor performance, and plan design decisions.

Minimizing Risk of Fiduciary Liability

The following are some steps employers can take to minimize the risk of fiduciary liability:

Governance & Oversight

Create a benefits committee charged with meeting regularly (e.g., quarterly).
Implement written committee procedures and document plan-related decisions.

Vendor Selection & Monitoring

Improve the process of selecting and monitoring vendors/service providers.
Consider and compare multiple vendors.
Include a compliance responsibility analysis as part of the vendor selection process.
Review vendor contracts and consider indemnification provisions.

Fees & Plan Assets

Ensure that only reasonable and necessary fees are paid for vendor services, taking into account the scope, quality, and value of the services provided.
Ensure participant contributions are appropriately collected, timely handled, and used solely for the benefit of plan participants.