Does Your Health and Welfare Plan Need a Committee?
- Katrina Veldkamp
- 3 minutes ago
- 3 min read
As employer-sponsored health and welfare plans grow more complex, transparency rules abound, new health and welfare plan fee disclosure rules take effect, and class action lawsuits increase (see our recent blog posts regarding voluntary benefits litigation and tobacco cessation program litigation), the need for structured oversight becomes critical. While ERISA doesn’t mandate fiduciary committees for these plans, forming one may be a smart move for plan sponsors.
Why Create a Health and Welfare Committee?
Employers often wear two “hats:” the settlor hat (non-fiduciary) and the fiduciary hat. Employers are generally the default plan administrator and named fiduciary under ERISA, responsible for complying with ERISA’s fiduciary duties. Employers are also responsible for plan design, plan amendments, and terminating plans – all generally considered to be non-fiduciary settlor actions. A committee to which fiduciary duties are delegated helps the employer fulfill its responsibilities and offers several key advantages:
Delegation and Accountability – Centralizes fiduciary responsibilities, clarifies who is responsible for what, and isolates potential personal liability to committee members formally designated as fiduciaries.
Better Decision-Making – Brings together HR, finance, legal, and compliance experts for well-rounded oversight.
Risk Management – Helps mitigate legal exposure by documenting prudent processes and decisions, including claims appeals decisions if delegated to the committee.
Vendor Oversight – Creates a system for regular review of TPAs, PBMs, and other service providers.
Stronger Documentation – Supports compliance with ERISA’s recordkeeping and fiduciary standards.
What are Best Practices for Health and Welfare Committee Governance?
To be effective, fiduciary committees should:
Adopt a Charter – Outline the committee’s purpose, authority, and responsibilities.
Choose the Right Members – Include individuals with relevant expertise and decision-making authority and choose the right number of members for your company.
Meet Regularly – Hold regular meetings and maintain detailed minutes.
Review Vendors and Fees – Benchmark costs, review service agreements and fee disclosures, and assess vendor performance regularly.
Monitor Compliance – Conduct regular reviews of compliance with ERISA and other laws applicable to health and welfare plans, such as HIPAA and the Mental Health Parity and Addiction Equity Act (MHPAEA).
Keep Minutes – Document committee discussion and actions in minutes of each meeting. Minutes should ideally be reviewed by legal counsel before finalizing for the plan’s records.
Provide Training – Ensure members understand their ERISA fiduciary duties.
Consult Experts – If committee members do not have the expertise required to fulfill their duties, hire and invite service providers with relevant expertise to attend meetings and provide insight (e.g., legal counsel, consultants, brokers).
Obtain Insurance – Consider appropriate insurance policies for protection of fiduciaries and plan assets, such as fiduciary liability insurance, cybersecurity insurance, and required ERISA bonds.
In short, establishing a fiduciary committee for your health and welfare plan can enhance compliance, improve oversight, and protect both the plan and its participants. Please contact a Boutwell Fay attorney if you have any questions about health and welfare plan committees.
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