ERISA litigation lawyer Jerry Schlichter has taken to social media to hunt for potential employee plaintiffs for a new brand of fiduciary litigation.
His law firm, Schlichter Bogard, LLC (Roger Denton having split from the firm), recently posted advertisements looking for employees and potential plaintiffs at Target, State Farm, Nordstrom, and Pet Smart. They seek “current employees who have participated in the company’s healthcare plan.” 
The litigation’s basis is found in the provisions of the innocuously labeled Consolidated Appropriations Act of 2021 (CAA)—provisions said by some to be “the most significant compliance challenge employers have faced since the Affordable Care Act.”
As was noted most recently at the NAPA 401(k) Summit, the law requires, among other things, a determination of “reasonableness” of vendor fees and services for healthcare, as well as prescription drug reporting for plan years 2020, 2021, and 2022 (due Jan. 21, 2023).
Failing to comply with the requirements of the CAA leaves employers at risk of fines and class-action lawsuits. But most employers are still in the dark, believing their broker or TPA will handle compliance on their behalf or that it’s simply “no big deal.”
“The fiduciary duty for a healthcare plan sponsor is essentially the same duty as a retirement plan sponsor of a 401(k) or 403(b),” Schlichter said. “That duty is to work for the sole benefit of the employees and to make sure fees are reasonable. And that applies to healthcare as well.”
Schlichter noted that this legal exposure for employer-sponsored healthcare plans has always existed, though the CAA now makes it concrete.
“It didn’t create a new duty; it simply defined that duty in a specific way,” he added.
Industry and legal professionals are comparing the CAA’s language to 408(b)(2) disclosures, a financial regulation imposed by the Department of Labor in 2012 to make it easier for plan sponsors to benchmark and ensure the reasonableness of retirement plan fees charged to participants.
“After our [fiduciary breach] litigation had begun, the DOL specifically highlighted the issue of a requirement for further disclosure,” he said. “But the underlying fiduciary requirement existed before the DOL did that, just as the underlying fiduciary requirement for employers in the healthcare space, certainly in my view, has been there all along.”
Schlichter and his firm famously brought fiduciary breach cases against numerous corporations and, more recently, university 403(b) plans with two—Tibble v. Edison and Hughes v. Northwestern University et al.—making their way to the U.S. Supreme Court.
However, despite predictions by many that this is the next phase of his fiduciary fight and that legal action will be widespread, Schlichter repeatedly claimed that isn’t the case.
“This should not be looked on as the beginning of some kind of all-out campaign,” he asserted. “We have information about these two plans that leads us to believe that they should be investigated, and that’s why we’re investigating them. In terms of a broader pattern or sort of a tip of a spear, I think it would be a mistake to make broad generalizations about what this means, as opposed to it being confined to specific facts involving two specific plans.”
Editor’s Note: A special panel on the CAA and its implications will be held at the NAPA DC Fly-In Forum, July 25-26. Apply to attend the Fly-In Forum at https://napadcflyin.org.
