In the realm of employee benefits, particularly health insurance, understanding and fulfilling your fiduciary role is crucial for small to mid-sized businesses (SMBs). Establishing a fiduciary committee can be a strategic move to ensure that your group health plan is managed effectively, complies with legal standards, remains cost-effective, and serves the best interests of your employees.
The Fiduciary Role in Health Insurance
As an employer, you have a fiduciary duty under the Employee Retirement Income Security Act (ERISA) to act in the best interests of your plan participants—your employees. This includes selecting and monitoring the performance of your group health plan with diligence, prudence, and care. Whether your plan is fully insured or self-funded, your organization is ultimately responsible for several key compliance issues.
A current hot button that has led to several lawsuits is the duty to ensure plan costs remain reasonable, with broker and third-party fees and/or commissions transparent. Additionally, plan contributions must be used appropriately, and the plan’s assets must be protected, with all plan transactions conducted in accordance with ERISA’s standards. Failure to do so puts your organization at risk for potential fines, loss of preferred tax treatment, as well as can result in personal liability of the named fiduciary to restore losses.
Benefits of a Fiduciary Committee
A fiduciary committee typically comprises members from various departments within your organization, such as human resources, finance, and operations. Larger organizations may also include their legal team. This committee is charged with the oversight of your group health plan and ensures that:
Compliance is Maintained: The committee helps navigate the complex web of health insurance regulations, ensuring that your plan remains in compliance with all applicable laws and regulations.
Costs are Controlled: By regularly reviewing the plan’s performance and costs, the committee can make informed decisions to keep the plan financially sustainable.
Employees’ Interests are Prioritized: The committee ensures that the plan meets the needs of your employees, providing them with the necessary coverage and benefits.
Establishing a Fiduciary Committee
To establish a fiduciary committee, consider the following best practices:
Select Experienced Members: Choose individuals who have the expertise and interest in fulfilling fiduciary responsibilities.
Regular Meetings: Hold meetings at least quarterly to review the plan’s performance and discuss any necessary changes.
Document Decisions: Keep detailed records of all committee decisions and the rationale behind them to demonstrate prudence and diligence.
For SMBs, a fiduciary committee is not just about fulfilling legal obligations; it’s about creating a framework for strategic decision-making that aligns with the company’s values and goals. By taking this proactive approach, you can ensure that your health insurance plan is not only compliant and cost-effective but also a valuable asset in attracting and retaining talent.