ERISA-Third Circuit Holds That Issuer of Group Annuity Contracts Is Not A Fiduciary

In Santomenno v. John Hancock Life Insurance Company, No. 13-3467 (3rd Cir. 2014), the plaintiffs had invested money in 401(k) benefit plans. They brought suit against John Hancock Life Insurance Company and its affiliates (“John Hancock”), alleging that John Hancock had charged excessive fees in violation of its fiduciary duty under ERISA on certain group annuity contracts held by their accounts under the plans. The district court granted John Hancock’s motion to dismiss, ruling that John Hancock was not a fiduciary with respect to the alleged breaches.

In analyzing the case, the Third Circuit Court of Appeals (the “Court”) said that ERISA makes a person a fiduciary to a plan if the plan identifies them as such. See 29 U.S.C. § 1102(a). This was not the case here. It also provides, in 29 U.S.C. § 1002(21)(A), that a person can be a fiduciary by being a “functional” fiduciary, that is, the person acts in the capacity of manager, administrator or financial advisor to a plan. Further, a person will be a “functional” fiduciary to the extent the person so acts. To be liable for a breach of fiduciary duty, the person must have committed the breach with respect to the action complained of. The question in this case is whether John Hancock acted as a fiduciary to the plans in question with respect to the fees that it set. The Court concluded that John Hancock did not so act, and it affirmed the district court’s decision.

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