Attorney-Client Privilege and ERISA Fiduciaries

The attorney-client privilege allows an attorney and his or her client to communicate, in writing or electronically, knowing that those confidential communications will not be released to opposing parties in the event of litigation. What happens when those 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 is an exception to the attorney-client privilege.

The Fiduciary and the Exception

Who is 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 the scope 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 an ERISA fiduciary cannot 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 attorney-client 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 is to 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 attorneys who may be giving legal advice, exercise caution and be aware that some cases involving a plan fiduciary and ERISA plan administration may not fall under the scope of the attorney-client privilege.

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