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Attorney-client privilege and ERISA fiduciaries

June 11, 2013

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The attorney-client privilege allows an attorney and his or her client to communicate, in writing or electronically, knowing that those confidential communications won’t be released to opposing parties in the event of litigation. But what about when the communications are between an attorney and a qualified retirement plan fiduciary involving the day-to-day administration of an Employee Retirement Income Security Act (ERISA) plan? In this case, there’s an exception to the attorney-client privilege.

The fiduciary and the exception

Who’s a plan fiduciary? Typically, multiple fiduciaries can assume the responsibilities for retirement benefit plans. This includes anyone who has:

•    Discretionary authority or control over the plan’s management or disposition of plan assets,
•    Discretionary authority or responsibility over the plan’s administration, or
•    The authority to provide, or potentially provide, plan-related investment advice in exchange for some type of compensation.

There are two reasons for the ERISA fiduciary exception to the attorney-client privilege rule:

Full disclosure of information. A major function of an ERISA fiduciary is to disclose plan administration information to participants and beneficiaries. Courts have found that this fiduciary disclosure obligation trumps the attorney-client privilege. This may include disclosing information, such as the plan benefits, to which beneficiaries are entitled and providing a summary annual report.

Participants are the true client. The ERISA fiduciary represents the participants and beneficiaries of the ERISA plan. Thus the attorney’s true clients in plan-related situations are the plan participants or beneficiaries themselves, not the fiduciaries.

As such, courts generally consider any communications between a fiduciary and an attorney that relate to plan administration to be outside of the attorney-client privilege and fair game in a court of law.

The limits of the exception

The ERISA fiduciary exception provides that an employer acting in the capacity of ERISA fiduciary can’t assert the attorney-client privilege against plan beneficiaries on matters of plan administration. But the fiduciary exception has limits — an exception to the exception in which the attorney-client privilege remains intact.

For example, the fiduciary may assert the attorney-client privilege where the fiduciary is involved in a nonfiduciary function, such as the plan’s start-up, amendment or termination. In addition, the ERISA fiduciary may assert the privilege where the fiduciary is pursuing legal advice for his or her personal interest, or there is a diversion or notable separation between the plan participants’ interests and the plan itself.

Know the difference

Countless court cases related to possible plan fiduciary breach of duty have produced many different outcomes. The best advice for plan fiduciaries: Keep in mind the importance of plan and participant disclosure requirements, and act transparently and in the best interest of plan participants and beneficiaries. For the attorneys who may be giving advice, exercise caution and be aware that some cases involving a plan fiduciary and ERISA plan administration may not be given attorney-client privilege.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

Guidance

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