Is Your Rx Program ERISA-Compliant? Review of Excessive Fee Cases in Health Plans

A recent wave of cases attempts to apply the same theory of liability for retirement plan excessive fee cases to health plans—specifically to arrangements with pharmacy benefit managers. While the cases thus far have been dismissed for lack of standing, health plan sponsors should consider reviewing their prescription drug arrangements (particularly the associated costs) and document a prudent fiduciary process in selecting and monitoring the health plan’s service providers.

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Related Content

• How Plan Sponsors Can Mitigate Risk in PBM Contracts
  Recognize that fiduciaries must ensure that every decision regarding a benefit plan is made with the care, skill, and diligence that a prudent person would exercise. These fiduciary obligations apply not only to retirement plans but also to employer-sponsored health and welfare plans. With healthcare costs escalating and regulatory scrutiny of plan management intensifying, third-party administrators and pharmacy benefit managers, and the fees they charge, merit periodic review by plan fiduciaries.
• ERISA Fiduciary Duties
  Scrutinize health plan-related fees and service providers with the same fiduciary vigor applied to ERISA retirement plans. The U.S. Department of Labor stresses that fiduciaries must choose service providers based on objective criteria, such as the fairness of their fees and the quality of their services. The selection process should be thoroughly documented to include a comprehensive assessment of potential providers, their services, and associated fees. Form 5500 Annual Reports Raise your awareness of the exposure to questions regarding fee payments. Form 5500, Schedule C, Service Provider Information, provides data about persons or entities that received $5,000 or more in direct or indirect compensation for services to an ERISA employee benefit plan.  The full Form 5500 filing is available through EFAST.  This gives participants and plaintiff attorneys an opportunity to see the fees and then, perhaps, ask questions.

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.    

• Employee Benefits & Executive Compensation Key Legal Developments Tracker (Current)
  Stay informed on new developments.
  • ERISA Litigation. In a unanimous decision written by Justice Sotomayor, the U.S. Supreme Court revived a class action from Cornell University workers who said their retirement plans were burdened by excessive fees, finding that the Second Circuit had overreached when it shut down the case. Cunningham v. Cornell Univ., 2025 U.S. LEXIS 1458 (Apr. 17, 2025); Justices Revive Cornell Worker’s ERISA Fee Suit.
  • Retirement Plans. DOL releases guidance addressing compliance questions on SECURE 2.0 Act’s required changes to annual funding notices (AFNs) under ERISA Section 101(f). The guidance includes two updated model AFNs. Field Assistance Bulletin 2025-02.
  • Health and Welfare Plans. President Trump signs Executive Order 14273, "Lowering Drug Prices by Once Again Putting Americans First," 90 Fed. Reg. 16441 (Apr. 18, 2025). The Executive Order outlines a policy to reduce prescription drug costs by expanding access to generics, launching a drug importation path, and capping insulin costs for Medicare beneficiaries. Fact Sheet; Trump’s Healthcare Order a Mixed Bag for Big Pharma.
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