ERISA establishes the fiduciary responsibilities applicable to employee benefit plan administrators and sets out certain fiduciary standards by which trustees’ actions will be measured, including the mandate that trustees are to discharge their duties solely in the interest of the plan with the care, skill, and diligence which a prudent individual would use in similar circumstances in accordance with the instruments governing the plan and through diversifying the plan’s investments.
Supplementing these fundamental standards prohibits specific transactions. A plan fiduciary may not cause the plan to engage in a transaction that constitutes a loan, sale, or other transfer of assets to a party in interest, or the improper acquisition of employer security or real property. The statute also forbids a fiduciary from dealing with assets of the plan in his own interest or receiving consideration from any party dealing with the plan in a transaction involving plan assets; nor may a fiduciary participate in any transaction involving the plan on behalf of a party whose interests are adverse to the plan. Trustees who violate their fiduciary duty may be held personally liable and the courts are free to fashion equitable relief appropriate to the circumstances, including removal of the trustee.
Fiduciary duty under ERISA has three components:
- a duty of loyalty pursuant to which all decisions regarding an ERISA plan must be made with an eye single to the interest of the plan participants and beneficiaries;
- the prudent-person obligation imposes an unwavering duty to act both as a prudent person would act in a similar situation and with single-minded devotion to those same plan participants and beneficiaries; and
- an ERISA fiduciary must act for the exclusive purpose of providing benefits to plan beneficiaries.
Of these, the duty to act solely in the interest of plan participants and beneficiaries has been called the main fiduciary duty.
A participant, beneficiary, or other fiduciary may bring a civil action against any plan fiduciary who breaches any responsibilities, obligations, or duties under ERISA. However, the statutory provisions recognizing a right of action against an administrator for breach of trust obligations are limited to claims on behalf of the plan for misconduct regarding the trust itself, not the payment of benefits to participants. Recovery from a fiduciary for breach of fiduciary duty inures to the benefit of the plan as a whole.
Therefore, ERISA actions for breach of fiduciary duty should be brought in representative capacity on behalf of the plan as whole. The trick seems to be proving that the plan assets themselves have been improperly depleted, rather than just the anticipated benefits of the individual plaintiffs being extinguished.
Moreover, there is usually a question or disagreement regarding whether the alleged wrongdoer, is actually a fiduciary or trustee of the pension plan. To determine whether a person is a fiduciary under ERISA with respect to the particular function at issue, discretionary authority or responsibility of such person with respect to that function must be examined and the actions of the person to be charged as a fiduciary for the function must be considered. However, the ERISA provisions, creating a duty of care by requiring the administrator to use the care, skill, prudence, and diligence, under the circumstances then prevailing, that a prudent person acting in a like capacity and familiar with such matters would use in conduct of like enterprise does not create a standard of absolute liability. For an ERISA fiduciary to be liable for a breach of duty, there must be a showing of some causal link between the alleged breach and the loss the plaintiff seeks to recover. To show that a fiduciary is excused from liability for any loss which results from a participant’s or beneficiary’s exercise of control over an investment under an ERISA provision, the causal nexus between the participant’s or beneficiary’s exercise of control and claimed loss is established with proof that the participant’s or beneficiary’s control is the cause-in-fact, as well as a substantial contributing factor in bringing about the loss incurred. Notably, the fiduciary duties owed participants and beneficiaries under ERISA apply only to the administration of the plan, not to its formation, amendment, or modification.
However, vested pension rights may not be altered without the consent of the retirees. Vesting of pension rights occurs when all the eligibility requirements of a voluntary noncontributory pension plan have been met, and the retiree may not therefore be divested of his rights.
Nonetheless, in the past, courts have upheld the district court’s conclusion that an employer was not acting in an ERISA fiduciary capacity in amending its pension and welfare plans to allocate assets and liabilities between itself and a newly created subsidiary, even though it allegedly "rigged" the allocation procedures so that the subsidiary might not have enough money to provide the benefits by the time it became responsible for the retirement benefits of the former employees of the parent corporation. The district court had rejected arguments that the employer, although not a fiduciary in making the decision to restructure, became a fiduciary when it "invaded" its ERISA plan trust corpus to allocate the trust assets and thereby exercised management and control over the assets. In upholding this decision, the court noted that changing the design of a trust does not involve the kind of discretionary administration that typically triggers fiduciary responsibilities. The court concluded that the conduct complained of—that the employer had allocated the assets of its plans in a manner allegedly benefiting the employer to employees’ detriment—might violate ERISA provisions regarding transfer of plan asset, but that the allocation did not implicate ERISA’s fiduciary provisions.
The 1980 amendments provided that a plan sponsor (the trustees) may cause a multiemployer plan to merge with another only if it complies with regulations of the Pension Benefit Guaranty Corporation, the benefits of participants are not adversely affected, and other statutory conditions are observed.