Kutak Rock Partner John Schembari was featured  in an article titled “Consolidated Chaos: Why the CAA Presents a Major Opportunity for Retirement Plan Advisors” in the Spring 2024 issue of NAPA Net The Magazine.

As the fallout from the passing of the Consolidated Appropriations Act of 2021 (CAA) becomes more apparent, a trend has emerged that presents both opportunity and risk for health care plan sponsors, fiduciaries and employee benefit plan advisors. Fiduciaries and advisors now have greater access to information relevant to their duties to provide the best rates and coverages from health plan carriers. But this new information also increases the risk of litigation in failing to properly put this information to use. These events mirror the fallout of the Pension Protection Act of 2006 (PPA) and its effect on retirement plan fiduciary reporting structures.

We’ve got a model on the retirement plan side of how to be good plan fiduciaries,” said Schembari. “Now we’ll see in the next five years how to tweak it to be good health care plan fiduciaries.

The article details increased responsibility and liability for fiduciaries now that new health care plan data – e.g. fees, costs, direct and indirect compensation to brokers - is required by the CAA to be made readily available to fiduciaries, employers, employees and the plaintiff’s bar.

Already, advertisements have been placed for litigation to be filed against fiduciaries for failing to fulfill their obligation to ensure the best rates for the health plan participants. The CAA now invalidates claims of data ignorance from fiduciaries and employers, as gag clauses are no longer permitted between health plan carriers and sponsors, and fiduciaries now have no basis to claim that they do not have access to data to ensure the fees their employees pay for health care are reasonable.

Ultimately, the CAA’s enactment is a good thing," Schembari said. "It gives employers more opportunity to provide good health plan benefits for their employees, for fair fees paid by the employer and employee. But it also means that employers can no longer stick their head in the sand and say, ‘Well, we didn’t know what we were paying,’" he said. "And that has created a potential class-action lawsuit boom in the health space.

For more advice on suggested next steps, including advice on establishing a fiduciary committee, benchmarking fees, understanding service provider compensation, and going to market, click here for the full article from NAPA Net The Magazine.