Guyan Intern’l, Inc v. Professional Benefits Administrations, Inc.

Guyan Intern’l, Inc v. Professional Benefits Administrations, Inc.

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT-Nos. 11-3126/3640

TPA Is A Fiduciary of the Plan Subject To Suit By Plan Sponsors

GUYAN INTERN’L, INC v. PROFESSIONAL BENEFITS ADMINISTRATORS, INC.

Ramifications of Court Decision:

  1. What is a Fiduciary? The court reasons: ERISA provides that “a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.” 29 U.S.C. § 1002(21)(A) The term person is defined broadly to include a corporation
  2. An entity that exercises any authority or control over disposition of a plan’s assets becomes a fiduciary. Id.at 490-91. So the threshold for becoming a fiduciary is lower for entities handling plan assets than for entities managing the plan. Id.at 491. An entity such as a third-party administrator becomes an ERISA fiduciary when it exercises “practical control over an ERISA plan’s money.” Id.at 494.
  3. What does this mean to TPA’s that handle “plan assets”?

“In light of these principles, PBA was a fiduciary under ERISA because it exercised authority or control over Plan assets. PBA had the authority to write checks on the Plan account and exercised that authority. Moreover, PBA had control over where Plan funds were deposited and how and when they were disbursed. PBA commingled Plan assets by depositing these funds into its general account rather than into the Plaintiffs’ separate accounts as the Agreement required. And then PBA used these Plan funds for its own purposes, again contrary to the dictates of the Agreement. The fact that PBA used Plan funds in ways contrary to how it had agreed to use them demonstrates that PBA had practical control over Plan funds once it received them from the Plaintiffs. “

 

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