A recent class action lawsuit caught my attention as I was reading the morning legal updates. It is interesting because it was filed by a group of surgery centers against roughly three hundred (300) employers. The defendants include large companies (e.g., Amazon, Chipotle, and Yahoo!) and small companies.
Plaintiffs allege that the employee benefit plans failed to comply with ERISA requirements in four counts, and include a fifth count based on state law, as follows:
- Failure to pay plan benefits pursuant to 29 U.S.C. 1132(a)(1)(B) by underpricing and underpaying Plaintiffs for out-of-network services provided to participants of the plans, along with making material misrepresentations regarding methods of pricing, payments, and the like;
- Breaching their fiduciary duty of loyalty and prudence by failing to pay pursuant to the plan language and requirements, failing to provide a meaningful appeals process, and improperly delegating duties to Aetna;
- Failure to produce documents (e.g., Summary Plan Descriptions, etc.) as required by ERISA;
- Failure to comply with ERISA claims procedures for which Plaintiffs seek injunctive relief; and
- Participation in unfair, unlawful, or fraudulent business practices under California law.
So, why does this matter? It may not, but it is a strong reminder that hundreds of employers can be caught up in costly and protracted litigation. This is when we remind our clients that sometimes the best defense is a good offense. If employers are not already doing so, employers should seriously consider conducting regular audits of their ERISA plans. Benefits of auditing the administration of an employee benefit plan include:
- Clear evidence that the employer is proactively fulfilling its fiduciary obligations;
- Early detection of noncompliance may provide employers opportunities to engage in voluntary compliance programs that may significantly reduce potential liability; and
- Identifying inefficiencies may reduce administrative and other costs related to the operation of the plan.
There certainly are other benefits to conducting an audit not listed here. Remember that penalties can be significant, and even failure to timely provide plan documentation to a participant can cost up to $110 per day.
Employers seeking assistance in these matters should contact Burke Costanza & Carberry LLP.