Whether a breach of the duty of prudence has occurred depends on “whether the fiduciary engaged in a reasoned decision-making process, consistent with that of a prudent man acting in a like capacity.” Id. (internal quotations and citations omitted).
Although the Secretary alleges that FCE and Ward concealed certain activities from the Chimes Defendants, the Secretary is not foreclosed from also alleging that the Chimes Defendants failed to fulfill their broader duties to prudently and loyally monitor the Plan.
Perez v. Chimes D.C., Inc., No. CV RDB-15-3315, 2016 WL 5815443, at *9 (D. Md. Oct. 5, 2016)
Took part in negotiation of fees and engagement of third party administrator
Failed to conduct a full request for bid proposals from alternative providers, or request that an independent broker obtain and compare bid proposals from alternative providers” and
Neglected conflicts of interest in relying on recommendations
Concealment of activities is not a bar to liability of fiduciaries
Although the Secretary alleged that the TPA concealed certain activities from the employer’s representatives, the Court held that the Secretary was not foreclosed from also alleging that they failed to fulfill their broader duties to prudently and loyally monitor the Plan.
Co-fiduciaries may be liable for “consequential breach
Aside from knowing violations, a fiduciary is also liable where “by his failure to comply with [his own ERISA fiduciary duties] in the administration of his specific responsibilities which give rise to his status as a fiduciary, he has enabled such other fiduciary to commit a breach.” Thus, the Court allowed this allegation to stand.
Failure to monitor fees may constitute a breach
The Secretary alleged that the corporate officers did not take other steps to ensure that TPA’s fees were reasonable, such as consulting with an independent expert regarding its fees or comparing the fees to industry benchmarks.
Failure to remit comissions and rebates may constitute a breach
The parties had agreed that, with a few specific exceptions, that any commissions or rebates paid by the Plan service providers to the TPA should be forwarded to the Plan. The Secretary alleged that the TPA failed to forward all payments that it received from service providers to the Plan.
Note: The DOL has published a booklet which is useful for clients as a general overview entitled “Meeting Your Fiduciary Duties”. Included is the following paragraph:
Monitoring a Service Provider
An employer should establish and follow a formal review process at reasonable intervals to decide if it wants to continue using the current service providers or look for replacements. When monitoring service providers, actions to ensure they are performing the agreed-upon services include:
– Evaluating any notices received from the service provider about possible changes to their compensation and the other information they provided when hired (or when the contract or arrangement was renewed);
– Reviewing the service providers’ performance;
– Reading any reports they provide;
– Checking actual fees charged;
– Asking about policies and practices (such as trading, investment turnover, and proxy voting); and
– Following up on participant complaints.
See also: Tibbie v.Edison Int’l, 135 S. Ct. 1823, 1829 (2015)