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Don Levit
11/17/2008 01:47 PM
Brian:
Thanks for posting this case.
I am curious if the standard of review would have been heightened if the plan was self insured?
Don Levit
Brian S. King
11/17/2008 01:47 PM
It depends on the circumstances surrounding how the plan is self funded. For example, if the plan is funded through a collective bargaining agreement and the plan fiduciaries are representatives from both employers and employee organizations (as is commonly the case for trust funds established under CBAs), it is difficult to see an inherent structural conflict of the type an insurer experiences. If the plan is self funded by the employer and the employer is the sole decision-maker, you can make a pretty good argument that, at least to some extent, there is an inherent structural conflict. Every dollar paid out is one less dollar going to the employer's bottom line. But that structural conflict is most pronounced with insurers.
Don Levit
11/17/2008 01:47 PM
Brian:
Do you know that it is possible to have an insurer which does have stringent fiduciary responsibilities to the participants of an ERISA plan?
It is called a Voluntary Employees' Beneficiary Association (VEBA).
Don Levit
Jeremy
11/17/2008 01:47 PM
Brian, I always understood that in most circuits, the technical rule for the application of a heightened standard of review was that the insurer had to be "properly" granted the discretion, not that they could simply grant it to themselves in the insurance policy. While I believe this is the technical rule, is anyone actually applying it? I think that for the rule to be satisfied, the Plan Administrator would have to maintain a separate Plan Document (as, I believe, is required by ERISA anyway) in which it specifically granted discretionary decision-making powers to the Insurer. Is this correct? Is any circuit applying the rule this way?
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