Compliance January 11, 2011

Health Plan TPA Ruled ERISA Fiduciary

January 11, 2011 (PLANSPONSOR.com) – A third-party administrator committed a fiduciary breach when it paid its expenses with funds supposed to be used for benefit claims in a self-funded health plan, a federal judge has ruled.
Reported by

U.S. District Judge David D. Dowd Jr. of the U.S. District Court for the Northern District of Ohio ruled that Professional Benefits Administrators (PBA) is a fiduciary under the Employee Retirement Income Security Act (ERISA) because it controlled plan assets when it diverted funds away from paying plan benefits.

According to the court, under the arrangements between the plan sponsor, Guyan International Inc., doing business as Permco, and PBA, PBA would keep funds provided for health claims payments in a segregated account. Instead PBA diverted $501,380 for its own purposes and, in the process, became an ERISA fiduciary.

Permco filed a lawsuit in federal court after discovering that PBA had not paid the plan claims as agreed.

The case is Guyan International Inc. v. Professional Benefits Administrators Inc., N.D. Ohio, No. 5:10 CV 823.

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