While there are plenty of cautionary tales about the way(s) in which you can unintentionally become a plan fiduciary, a recent court case highlights another potential trap for company officials.
In Thomas E. Perez v. Geopharma, Inc., et al., Geopharma’s CEO, Mihir Taneja, brought a motion to dismiss an ERISA breach of fiduciary duty claim under the company’s health and welfare plan brought against him by the DOL. Bryan Cave LLP explains that the DOL alleged that because Taneja had signature authority on Geopharma’s bank accounts — which included the plan’s participant contributions — he was a plan fiduciary.
The DOL sought to hold Taneja, the company and two other company officers jointly liable for fiduciary breaches under ERISA. The DOL argued that as CEO, director, secretary and signatory to the company’s bank accounts, Taneja had a fiduciary duty to monitor the plan’s other fiduciaries, as well as the company’s management and administration of the plan.
Taneja countered that he was not a plan fiduciary because there was no proof that he performed any function or exercised any authority related to the “particular activity” of the payment of employee premium contributions. He also noted that having general signature authority over the company’s bank accounts was not enough to trigger ERISA’s fiduciary responsibilities, since this would make every company officer an ERISA fiduciary. Finally, he argued that he could only become a plan fiduciary if he were named a fiduciary under the plan or exercised discretionary control or authority over the plan or the management of its assets.
The United District Court for the Middle District of Florida, denied Taneja’s motion, holding that his signature authority did, in fact, make him a plan fiduciary because, among other things, ERISA provides that a person can become a plan fiduciary by exercising any authority or control over the management or disposition of plan assets, even without discretion.
The court declined to determine whether discretion was required to create an ERISA fiduciary obligation at this point in the proceedings, but noted that at least one federal circuit (the 11th U.S. Circuit Court of Appeals) has suggested that discretion is a prerequisite for ERISA fiduciary status. Not cited here, but perhaps worth noting was an observation by Osler, Hoskin & Harcourt LLP that in its opinion, the 11th Circuit observed that, “Preservation of the purposes of ERISA does not require that we ambush corporate officers with stringent fiduciary duties and personal liability…”
Regardless, it was another reminder that it doesn’t take much of an authority connection to create a fiduciary responsibility to an ERISA plan.
