When employers assume substantial benefit-administration duties, they may be liable when the proper paperwork doesn’t get to where it should. Because federal law imposes a fiduciary obligation on benefit administrators, employers may be sued when they assume the administrator’s role.
That’s why it’s important to track benefit applications, coverage and payroll deductions to make sure employees receive the benefits they sign up for, especially if the benefit-plan documents identify the company as the plan administrators.
Recent case: Kathleen Hughes, a United Staffing employee, asked to add her daughters to her health insurance plan. The company was responsible for forwarding and communicating all coverage information and claims to the insurance carrier. Employees were told to direct any questions to the employer.
Hughes filed a change-of-enrollment form. United Staffing then began taking family insurance premiums out of Hughes’ paycheck and told her that her children were covered.
They were not, partly due to delays forwarding the paperwork to the insurer. As a result, when one of the daughters had surgery, the claim was denied. Hughes sued United Staffing for breach of its fiduciary duty, and the federal court hearing the case agreed that the employer had breached that duty. It also ordered the employer to pay Hughes’ attorneys’ fees. (Hughes v. Legion Insurance Company, et al., No. H-03-0993, SD TX, 2007)