Attention to fiduciary roles and responsibilities in the context of managing health and welfare benefit plans has been limited since ERISA was enacted in 1974. However, in early 2024, the narrative quickly shifted. On February 5, 2024, Plaintiff Ann Lewandowski filed a lawsuit against Johnson and Johnson, The Pension and Benefits Committee of Johnson and Johnson, and the Committee’s members alleging a breach of fiduciary duties and other parallel grievances pertaining to prescription drug cost mismanagement.
After the filing of the Johnson and Johnson suit, several similarly situated plaintiffs filed fiduciary mismanagement claims in a domino-esque fashion as ERISA fiduciary breach causes of action gained attention. Unsurprisingly, this litigation surge has continued, which highlights the need for plan fiduciaries to have a comprehensive understanding of ERISA’s fiduciary requirements and responsibilities.
Johnson & Johnson (J&J) is accused of overpaying for certain drugs that were available at much lower costs, causing participants to spend significantly more than necessary for similar medications. The suit also accuses J&J of profiting from the plan because some of the more expensive medications paid for by the plan were actually sold by J&J.
In the complaint, the Plaintiff claimed that a plan participant with a 90-pill prescription for a generic drug used to treat multiple sclerosis could fill that prescription, out-of-pocket with no insurance, for an average of $52.76 at pharmacies like Wegmans, ShopRite, Walmart, Rite Aid, or Cost-Plus Drugs online. By contrast, J&J allegedly contracted to charge their ERISA plans and participants $10,239.69 for each 90-pill prescription of the same drug. The Plaintiff further claimed that this mismanagement of health benefit plan funds could contribute to increased health care premiums and out-of-pocket drug costs, while also limiting employee wage growth.
Without ruling on the claims of a breach of fiduciary duty, the J&J case was partially dismissed on procedural grounds. The court found that the plaintiff lacked standing because the plaintiff failed to show harm that could be addressed. However, the case has been refiled with amended claims for the original plaintiff along with an added plaintiff.
JPMorgan is accused of paying too much for certain prescription drugs that were available at lower prices and then passing those costs on to plan participants. In addition, JPMorgan is accused of failing to act on potential cost-saving strategies that the company should have been aware of and mismanaging the PBM relationship and the fees paid to the PBM.
No motions have been filed by either party thus far aside from the initial complaint; however, the Defendant submitted a request for an extension of time to respond to the initial complaint as of April 4, 2025.
Similar to the J&J case, the main fiduciary issue alleged in this case is that Wells Fargo failed to oversee their PBM adequately, leading to excessive plan costs and higher out-of-pocket expenses for employees.
This case was one of the first large cases involving a plan sponsor completely outside of the healthcare industry. It serves as a reminder that plan sponsors must actively monitor service providers, especially in areas that directly impact plan costs. Similar to the original J&J case, the court dismissed this case for lack of standing, finding that the plaintiffs failed to show redressable injuries.
Owens & Minor, Inc. filed suit against their TPA, Anthem Blue Cross Blue Shield in Virginia, claiming Anthem breached their fiduciary duty while managing and administering plan payments and assets. Additionally, disputes over availability of plan data were added to Owens & Minors’ claims. The main accusations include (1) Anthem’s withholding of Plan specific data after numerous requests, and (2) Anthem’s engagement in transactions that they knew or should have known were not in the plan participants’ best interest.
In terms of fiduciary breaches, Anthem is accused of interfering with Owens & Minor’s fiduciary duties by withholding Plan specific data, as well as violating the ERISA fiduciary duty prohibiting self-dealing by participating in self-enriching transactions. No motions to dismiss have been filed to date, but this will be an interesting case to watch to determine if TPAs will be subject to this heightened legal responsibility for group health plans.
Lastly, we can see examples of fiduciary breaches in the context of health plan reimbursements through the S.M.O. v. Mayo Clinic case. In this case, a long-time employee of the Mayo Clinic filed a class action lawsuit against the Mayo Clinic and the plan’s administrator after difficulty getting mental health care for their child. Despite following plan guidance and using member portal search functions, the Plaintiff could not find an in-network provider within 50 miles and incurred costly out-of-pocket expenses.
Mayo Clinic is accused of not providing timely or clear explanations for its out-of-network reimbursements, making it difficult for participants to understand their coverage. Additionally, Mayo Clinic is specifically accused of failing to ensure transparency and accountability from its plan vendor (Medica). Mayo Clinic filed a motion to dismiss these allegations in October of 2024; however, the case is still being argued and there has been no concrete ruling.
These cases underscore the tension between corporate governance, employee benefits, and the obligation of fiduciaries to act solely in the best interest of plan participants. They also illustrate the potential ripple effect of fiduciary litigation, prompting calls for transparency and prudent management when it comes to employee benefit plans. But what exactly does it mean to be a prudent fiduciary? And how does one act in the best interest of the Plan and its participants?
ERISA §404 outlines the duties of a plan fiduciary and requires fiduciaries to perform their duties:
Examples of ERISA fiduciary duties include setting and following plan terms, adopting formal plan documents, providing participant disclosures; reporting certain information to the government (e.g., Form 5500s), choosing and monitoring vendors to help administer the plan, and properly handling plan assets.
Employer-sponsored plans subject to ERISA should have a named fiduciary. Typically, this is an individual, or sometimes a committee of people, working for the plan sponsor with decision-making authority. However, fiduciary status can also flow from the plan functions performed by a person who is not otherwise named as a fiduciary. It is not a person's title, office, or other formal designation that determines fiduciary status. ERISA provides that a person is a “fiduciary” with respect to an employee benefit plan to the extent that the person:
Fiduciary responsibility under ERISA generally cannot be disclaimed if a person performs fiduciary functions. Even if someone signs a document stating they are not a fiduciary, if they exercise control over plan management, assets, or administration, or provide investment advice for a fee, they are legally considered a fiduciary and held to ERISA’s fiduciary standards.
The following are some steps employers can take to minimize the risk of fiduciary liability:
While it’s true that plan sponsors can manage fiduciary duties on their own, it’s a complex and resource-intensive process. MZQ Consulting offers a fiduciary product designed to help guide and support employers in fulfilling their fiduciary duties. For more information about our service, please reach out to engage@mzqconsulting.com.
