Jump to content

Responding to Subpeona


Recommended Posts

Recently, a TPA asked me how to respond to a subpeona they received from the attorney for a plan

participant. I am not an attorney, so I am looking for advice.

It seems to me that the TPA has no direct fiduciary duty to the participant. Any disclosure would require the permission of the plan sponsor or plan administrator or plan trustee.

No participant data would be released on any person except the plan participant. Amounts of distributions, compensation, service, etc. that were not the direct records of the participant would be off limits unless the other participants gave express written approval to disclose the information. This would include information on the timeliness of participant loan payments.

Any other guidelines I should follow?

Link to comment
Share on other sites

Guest b2kates

I presume you are talking about litigation in federal court. You need to seek local counsel advise. I am unaware of any privilege of records, but if that is what is being asserted then the TPA should have representation or at least confer with the Plan Sponsor's attorney before complying with a subpeona.

Personally, if the subpeona is issued by a state court, again I would have a local attorney respond and deny the subpeona or seek tp have it stayed or quashed.

Link to comment
Share on other sites

The TPA needs to be careful here. Subpoenas are legal documents that empower an an attorney, as a officer of the court, to demand documents in the recipient's possession unless there is an valid exemption under law. The failure to comply can result in sanctions being imposed by a court against the TPA. The TPA needs to consult with counsel on how to respond. Generally there are three options:

1. comply with the request if the documents are in the TPA's possession or provide an explaination as to why the subpoena cannot be complied with e.g. documents have been destroyed, lost etc..

2. notify the plan that the TPA has received the subpoena and tell the plan that it will be complied with unless the plan files an objection with the court.

3. the TPAs attorney can file an objection to the subpoena ( most expensive for the TPA) based on applicable law with the court.

Also, state law subpoenas for law suits brought for benefit claims under ERISA are valid since under ERISA 502 participants can bring for claims for benefits in state court instead of federal court.

Link to comment
Share on other sites

Guest BenefitsLawyer

A couple of points to take into account. First, if the subpoena seeks any protected health information, the HIPAA privacy rule kicks in, and that rule requires more than just a subpoena (unless the subpoena is accompanied by a court order). Second, even if the subpoena is seeking information that "belongs" to a client of the TPA, if the subpoena is addressed to the TPA, then the TPA is going to take the heat (or at least the first blast) if the TPA does not comply--the TPA needs to tread very carefully to make sure that it does not improperly release its client's information, but also to make sure that the TPA protects its own interests--a tricky task, to be sure. Bottom line: Find a knowledgeable lawyer.

Link to comment
Share on other sites

You have received good information and good advice here. There is no "Administrator's Privilege" or "Actuaries' Privilege" in any jurisdiction. The TPA has no excuse for not complying with a subpoena. He may not selectively choose to provide information only applicable to the plan participant.

Under ERISA, the actuary is a named fiduciary. And under ERISA, fiduciary duties run to the plan participants. I am therefore surprised to see an actuary suggest that the TPA has "no direct fiduciary duty to the participant". This is simply wrong for the actuary and wrong for the administrator.

The TPA has a similar duty to participants whether he is deemed to be a "Plan Administrator" (a named fiduciary), or simply to be employed by the Plan Administrator to carry out administrative functions. Disclosure pursuant to a valid subpoena doesn't require "permission" from the Employer, the Trustee or the Administrator. As mentioned above, failure to comply with the subpoena requires an objection.

Link to comment
Share on other sites

So you would release any and all plan records if a participant's lawyer asked?

If he sues to contest a profitsharing allocation made, could he ask to see the

compensation levels of all other employees? How about their birth dates or marital status?

Is he entitled to know if another participant named their mistress as beneficiary?

Can he ask if another participant made investment decisions for their own earmarked account?

My understanding is that affected participants should be given the opportunity to object

to disclosure and enough time to act to prevent invasion of their personal privacy.

Link to comment
Share on other sites

Why is an actuary a named fid under ERISA for the performance of services to the plan? Under DOL Reg. 2509.75-5 Q-D-1 a professional advisor such as an actuary or attorney rendering professional services to a plan will not be considered fids. Why would an actuary want to designated as a named fid?

Link to comment
Share on other sites

... and don't assume (here or otherwise) that actuary = TPA.

BTW, does the service agreement between the TPA and the plan administrator address this possibility?

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

Link to comment
Share on other sites

A fiduciary is one who has any power of control, management or disposition over the funds or other property of the employee benefit fund. Citing a DOL Q&A from 1976 is not determinative. There have been many cases on this issue since then. Some have held that certain individuals (consultant, TPA, attorney, insurance company and agent, accountant) are not fiduciaries under the facts provided. Others have held that similar individuals are fiduciaries because they exercise such control. Determining the amount to be paid to a participant (which an actuary does and a TPA firm may do) can qualify an individual as a fiduciary unless no discretion is involved. Determining eligibility for a payment can also make one a fiduciary. A TPA firm needs written direction from the Employer or Administrator (depending on the plan docs.) in cases where discretion is involved to avoid being deemed to be a fiduciary.

Note that cases where service providers are not considered ERISA fiduciaries may still subject the service providers to liability under traditional theories of negligence, malpractice or fraud.

If I am not a party to a legal action but am in possession of relevent materials subject to subpoena, I would first contact my client and suggest that they may wish to object to certain disclosured. If no objection is made, I would tender the materials subject to the subpoena and no other materials. If I can still safeguard items that are considered to be confidential while complying with the subpoena, I will do so.

Link to comment
Share on other sites

Under ERISA, the actuary is a named fiduciary. And under ERISA, fiduciary duties run to the plan participants. I am therefore surprised to see an actuary suggest that the TPA has "no direct fiduciary duty to the participant". This is simply wrong for the actuary and wrong for the administrator.

The TPA has a similar duty to participants whether he is deemed to be a "Plan Administrator" (a named fiduciary), or simply to be employed by the Plan Administrator to carry out administrative functions. Disclosure pursuant to a valid subpoena doesn't require "permission" from the Employer, the Trustee or the Administrator. As mentioned above, failure to comply with the subpoena requires an objection.

My post was made in opposition to your conclusion above that an actuary is a named fiducicary without any further description of what duties are performed by the actuary. The DOL regulation is still the law- any professional rendering services to a plan is not a fiduciary because of the performance of such services. There was nothing in the post that suggested that the TPA was acting in any fiduciay capacity.

Link to comment
Share on other sites

Since a party does not have to be a "named fiduciary" but can very easily become a fiduciary by means of actions taken, whether services rendered or advice given etc, the cited DOL Reg 2509.75-5 seems irrelevant. There have been numerous cases, reports, articles and I even think that there was a fairly recent DOL release or opinion on the issue of parties, including professionals, becoming liable fiduciaries because of services rendered. There was even a thread on this Board about this a few months ago in which cites were given.

It also does not matter whether this TPA is now or becomes a fiduciary. This does not have any bearing on either the subpoena or any action that might be taken by a participant etc. in the future.

The TPA whether also an Actuary or not, IMHO, should seek competent legal advice regarding what might or might not be withheld or not complied with, and most importantly how to properly do it. To not comply would be foolhardy. The matter might be resolved either by compromise or counter filing etc but whatever action is taken, it needs to be with competent advice and needs to be proactive.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

No, these are not qdro's, but I won't disclose any other aspects of the cases.

Related question: to comply, the TPA must build a file of more than 1,000 pages covering several years.

Who pays for the time and costs, and at what rate?

The party seeking the subpoena?

The plan sponsor?

The TPA?

What are reasonable charges for labor, photo costs, professional review?

Does the TPA have recourse to charge any of the above for legal costs?

Link to comment
Share on other sites

I dont understand why that much information the actuary possesses is not in the possession of the plan for which the disclosure provisions of ERISA would apply, e.g., participant is entitled to plan docs, SPD, annual reports, etc at a charge of 25 cents per page. The subpoena cannot be a fishing expedition for documents that are available from the plan under ERISA upon payment of the copying charge. If the request is too onerious or is available from other sources the TPA could ask the court to quash the subpoena but the TPA needs to retain counsel.

Link to comment
Share on other sites

Litigation is an expensive process to all.

A subpoena can request tons of data. However, it is not always necessary to provide all the documentation requested.

The least expensive option, in my experience, has been to ask (and pay) my legal counsel for help in complying with the subpoena in the most efficient manner.

Link to comment
Share on other sites

  • 9 months later...

SoCalActuary,

If you don't want to disclose the information, you should file an objection in court. Depending on the nature of the subpoena, your failure to respond could be deemed an admission of liability.

The plaintiffs' attorneys need to file a motion to compel if you don't respond, but I wouldn't wait for that motion.

I'm curious, why not hire an attorney to help you with litigation? Has the unauthorized practice of law in the benefits area gone so far that TPAs and service providers are advising clients on how to deal with actual, pending litigation?

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...