U.S. Fifth Circuit - The FindLaw 5th Circuit Court of Appeals Opinion Summaries Blog

'Ministerial' Plan Administrators Aren't ERISA Fiduciaries

Humana, as a third party service provider to an ERISA benefit plan, cannot sue under the Act to recover funds paid out, since it was not an ERISA fiduciary, the Fifth Circuit ruled on Monday. Rather, under the plan management agreement, Humana's role was simply ministerial, more akin to a lawyer or collections agent.

Humana and API entered into a plan management agreement whereby Humana would administer API's employee benefits plan. Under the PMA, API was to retain decisionmaking control over all discretionary decisions, with Humana acting within the framework of the plan's management policies. The limited discretion Humana had, even under the agreements broad subrogation terms, kept it from being treated as a true ERISA fiduciary, the Fifth Circuit found.

Fiduciaries Must Exercise More than Ministerial Powers

When Patrick Nguyen, a covered API employee, was injured in an auto accident, the plan paid almost $275,000 for his medical expenses. Nguyen also recovered $255,000 in damages as part of a settlement. The Plan notified Humana that it could not seek reimbursement from Nguyen under the Plan's terms, but Humana disagreed, suing Nguyen to recover.

ERISA allows fiduciaries to seek equitable relief to stop violations of ERISA's regulatory provisions. To qualify as an ERISA fiduciary, a party must exercise discretionary control and authority over the plan's management, administration, or disposition of assets. Discretion in ministerial functions -- the kind one would "employ an outside expert" to perform -- does not count, however. As in common law trusts, lawyers, brokers, realtors and the like may be involved in discretionary actions without becoming fiduciaries.

Sorry Humana, You're Just Like a Lawyer

To determine whether Humana was a fiduciary, entitled to sue Nguyen for recovery under ERISA, or simply a ministerial employee, the Fifth Circuit examined two factors. First, there was a framework of policies, rules and like governing Humana's actions. Secondly, the plan administrator actively supervised Humana's performance of the task. Both of those factors show that Humana was a ministerial employee, not a fiduciary, the Fifth held. The tasks it was to perform were typical of the work done by law firms and collections agencies.

That's not the end of the story, however. Humana could still demonstrate that it exercised actual discretionary authority or that API had never set out policies and procedures as required by the plan management agreement. The agreement did not, however, make Humana a fiduciary as a matter of law.

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