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Let's continue with answering "How Do The Fiduciary Duty Rules Affect The Plan Operation?"...

Evaluating Fees
Fees are just one of the several factors fiduciaries need to consider in deciding on service providers.  When the fees for services are paid out of plan assets, fiduciaries will want to understand the fees and expenses charged and the services provided.

While ERISA does not specify a permissible level of fees, the law does require that fees charged to the plan be "reasonable."  After careful evaluation during the initial selection, the plan's fees and expenses should be monitored to determine whether they continue to be reasonable.

In comparing estimates from prospective service providers, employers should ask which services are covered for the estimated fees and which are not.  Some providers offer a number of services for one fee, sometimes referred to as a "bundled" services arrangement.  Others charge separately for individual services.  Employers should compare all services to be provided with the total cost for each provider and consider whether the estimate includes services the employer did not specify or want.  Remember, all services have costs.

Some service providers may receive additional fees from third parties, such as insurance brokers.  Employers should ask prospective providers whether they get any compensation from third parties, such as finder's fees, commissions or revenue sharing.

Plan expenses may be paid by the employer, the plan or both.  In any case, the plan document should specify how fees are paid, and the fiduciary must ensure that those fees and expenses are reasonable, necessary for the operation of the plan, and not excessive for the services provided.

Monitoring Service Providers
An employer should establish and follow a formal review process at reasonable intervals to decide if it wants to continue using the current service providers or look for replacements.

When monitoring service providers, employers should:
   - Review the service providers' performance;
   - Read any reports they provide;
   - Check actual fees charged;
   - Ask about policies and practices;
   - Ensure that plan records are properly maintained; and
   - Follow up on participant complaints.

Maintaining the Plan's Benefits Claims Procedures
Under ERISA, group health plans must establish and maintain reasonable claims procedures that allow participants and beneficiaries to apply for and receive the plan's promised benefits.  Fiduciaries must maintain the plan's procedures.  DOL regulations provide minimum standards for benefit claims determinations for ERISA plans (including insured and self-insured plans).  While many plans hire benefits professionals or insurance companies to process claims, it is important for an employer to understand the requirements before selecting a service provider who can comply with the standards.

A claim for benefits is a request for a plan benefit made in accordance with the plan's procedures by a claimant (participant or beneficiary) or a claimant's authorized representative.  Questions concerning plan benefits, coverage and eligibility questions, and casual inquiries are generally not considered claims for benefits.

The key issues to be come familiar with are the timeframes for deciding claims, the contents for the notices of benefit denials and the standards for appeals of benefit denials. More information on the benefit claims procedures for group health plans is available on the DOL's webpage for health plan compliance assistance.

Coming soon - The last of the series, Part 6: Are There Some Transactions That Are Prohibited?

This information is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice.  Readers should contact legal counsel for legal advice.

From LEGISLATIVE BRIEF Brought to you by The Bramlett Agency, March 2015, Zywave.

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