FIDUCARY DUTIES & NONSUBSCRIBER INJURY BENEFIT PLANS
Many nonsubscriber benefit
plans operate under a federal law: The Employee
Security Act (ERISA). The purpose of ERISA
is to set minimum standards for most voluntarily
plans and to protect persons that are entitled
to receive benefits under such plans. ERISA
generally requires that any person or entity
with a role in making benefit-related decisions
to abide by certain requirements. For example,
ERISA requires that every plan must designate
at least one person as a named fiduciary" and
plan administrator. A plan must have at least
one fiduciary (a person or entity) named in
the written plan, or through a process described
in the plan, as having control over the plan®s
operation. The named fiduciary can be identified
by office or by name and for some; it may be
an administrative committee or a company's
board of directors. ERISA also provides that
any person who exercises the authority or responsibility
described in the fiduciary definition will
be a fiduciary, whether or not he/she knowingly
accepts that responsibility. Thus, fiduciary
status is based on the functions performed
for the plan, not just a person®s title.
ERISA provides that a fiduciary includes any
- Exercises discretionary authority or control
with respect to the management of a plan,
- Exercises any authority or control with
respect to management or disposition of plan
- Has discretionary authority or responsibility
in the administration of the plan, or
- Provides investment advice for a direct
or indirect fee with respect to the money
or property of the plan.
Some plan-related decisions are not fiduciary
actions but rather are business decisions made
by the employer. For example, the decision
to establish a plan, determine the benefit
package, include certain features, make amendments
or terminate a plan, are business decisions.
When making these decisions, an employer is
acting on behalf of the business not the plan
and therefore is not a fiduciary. However,
when an employer (or someone hired by the employer)
takes steps to implement such decisions, that
person is acting on behalf of the plan and
in carrying out these actions, is a fiduciary.
What are some of the
Duties of a Fiduciary?
ERISA provides that
fiduciaries must discharge their duties solely in the interest of the
plans participants and beneficiaries" and for
the exclusive purpose" of providing benefits
and defraying reasonable expenses of administration.
Fiduciaries must also discharge their duties with
the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent
person acting in a like capacity and familiar
with such matters would use in the conduct
of an enterprise of a like character and with
like aims. However, a fiduciary must decline
to follow the plan document if the direction
contained in the document is inconsistent with
ERISA. To ensure directions are proper and
not contrary to ERISA, specific procedures
must be followed to ensure that the plans
provisions are fairly implemented. These procedures
include requirements that participants must
not be subject to coercion or undue pressure
when making decisions.
ERISA also requires
that a fiduciary discharge his or her duties in accordance with the documents
and instruments governing the plan insofar
as such documents and instruments are consistent
with ERISA. Fiduciaries that do not follow
the principles of conduct set forth in ERISA
may be personally liable to restore any losses
to the plan, or to restore any profits made
through improper use of plan assets. Regardless
of whether an employer hires a third-party
or uses internal administrative committees
to manage the plan, there are still certain
functions that can deem an employer a fiduciary.
The plan document serves as the foundation for plan operations and as such, employers will want to be familiar with their plan document, especially when it is drawn up by a third-party. Fiduciaries should review the plan document periodically to make sure it remains current. For example, some nonsubscriber insurance policies come with a "free" plan designed so that the plan and the policy work in conjunction with one another. In this instance when the employer changes insurance policies it also needs to ensure that the existing benefit plan is either adequately revised or a new plan is created and established.
ERISA requires that
participants receive written notice of certain
facts regarding plans. Some
of these facts must be provided to participants
regularly and automatically or upon request.
One of the most important documents participants
are entitled to receive is a summary of the
plan, the Summary Plan Description or SPD.
The SPD is important because it outlines how
the plan operates and what it provides to participants. If
a plan is changed, participants must be informed,
either through a revised SPD or a separate
document, a Summary of Materials Modifications,
which also must be given to participants free
A Form 5500 Annual Return/Report
must be filed with the federal government
with certain benefit plans. The Form 5500
reports information about the plan and its
operation to the U.S. Department of Labor,
the Internal Revenue Service, the Pension Benefit
Guaranty Corporation, plan participants and
For a copy of the U.S.
Department of Labor®s
Brochure, Meeting Your Fiduciary Responsibilities,
please click here. To
view the Employee Retirement Income Security
Act-ERISA law, please click here.
For more information on the Form 5500, associated
instructions and filing requirements, see EFAST on
the DOL website. Visit the Resources" section
and request a copy of the publication: Reporting
and Disclosure Guide for Employee Benefit Plans."
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STATE REQUIRED FORMS & NOTICES FOR TEXAS
The state-required notices
for both nonsubscribing and subscribing businesses
have been revised
to reflect the change in administration from
the Texas Workers Compensation Commission
(TWCC) to the new Division of Workers Compensation
(DWC) at the Texas Department of Insurance.
The revised forms and notices for Texas nonsubscribers
- DWC Form 5 (formerly
the TWCC 5) used to notify the DWC of a
status both when the business becomes a nonsubscriber
initially and annually thereafter.
- DWC Form 205 (formerly the TWCC 205), an
addendum to the DWC 5 for nonsubscribing
businesses with more than one location.
- DWC Notice 5 and
DWC Notice 5s (formerly the TWCC Notice
5 and TWCC Notice 5s) which
must be posted in certain areas of workplace
to notify employees of the company®s nonsubscriber
- DWC Form 7 and DWC Form 7s (formerly the
TWCC 7 and TWCC 7 Supplement) used to report
lost time injuries, occupational diseases
The official deadline
for utilizing of the revised DWC forms is
May 1, 2006 but nonsubscribers
may begin utilizing the forms immediately. The
new forms are available on TXANS website,
simply click Forms & Notices" under the Benefits and Services icon on the main page.
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TEXAS EMPLOYERS MEET
TO LEARN NEW WAYS TO ENHANCE NONSUBSCRIBER
More than four hundred
nonsubscribing employers and nonsubscriber
industry professionals participated
recently in TXANS 16th Annual Nonsubscriber
Conference and Exhibition in Austin, Texas.
TXANS Annual Nonsubscriber Conference and
Exhibition is the largest, most comprehensive
program designed exclusively for businesses
that provide injury benefits outside of traditional
workers® compensation. TXANS® 2006 Nonsubscriber
Conference & Exhibition featured an educational
general session and more than twenty concurrent
Learning Labs on a variety of topics from the
nonsubscriber perspective. Topics that included
insurance, medical care, legal considerations,
regulatory issues, compliance, OSHA, the EEOC
laws and more.
One Learning Lab focused
on nonsubscriber workplace safety. A panel of nonsubscribing
employers discussed how the option to operate
as a nonsubscriber provides their company additional
opportunities and incentives to involve employees
in the safety process. One employer noted, Since
becoming nonsubscribers we realize that employees
and not managers are best positioned to see
changes that need to be made to reduce workplace
injuries." Another said, "When my company was
in workers® compensation it averaged one injury
a week. But after having the freedom to focus
on workplace safety and not dealing with the
complexities of the system, my company is only
days away from going an entire year with no
lost time injuries."
Another Learning Lab explored how nonsubscribers, medical providers and employees interface to improve care and maintain affordable medical costs. A panel of medical professionals revealed that responsible nonsubscriber programs keep employers involved, which helps ensure employees receive quality care. Providers and nonsubscribing employers work together to establish rates for medical care that are acceptable to both the employer and the health care provider.One panelist commented, "It has been our experience that most nonsubscribers understand that quality care from the beginning reduces overall costs as well as the time it takes for employees to recover."
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TXANS members reported
the following findings in response to a recent TXANS Poll question:
How did the decision to become a nonsubscriber
affect your company's efforts with respect
to workplace safety and injury prevention?
- 85.71% Improved.
The company paid more attention to safety
and injury prevention.
- 14.20% No Change. The company paid the
same level of attention to safety & injury
- 0% Decreased. The
company paid less attention to safety and
NEW NONSUBSCRIBER CASE SUMMARIES AVAILABLE IN TXANS KNOWLEDGE CENTER
TXANS gratefully acknowledges Nick Bettinger,
an attorney with the Fort Worth law firm of McDonald
Sanders, for his assistance with a number
of new nonsubscriber case summaries that are
now available in TXANS Knowledge Center. The
new case information not only offers a summary
of the case at hand but also the applicable
lesson for Texas nonsubscribers.
To follow is an example of one case summary
- Mora v. Hemco Industries.
Julio Mora was a welder for Hemco Industries. On June 30, 1997, Mora was lifting a "jig" when he heard his spinal column make a noise. Mora reported the injury to his supervisor, but believing the injury was not serious, he continued working that day. Mora first saw a doctor nine days after lifting the jig and was later diagnosed with a herniated disc in his low back. Mora said he had never had a prior back injury. Mora eventually underwent back surgery which Hemco paid for under its injury benefit plan.
On appeal, the court decided that Mora had
not presented any medical evidence which
linked the lifting of the jig to having caused
disc. As in Lewis, the employee testified that he injured his back
lifting the jig and that was enough to establish the cause of the
herniation. Unfortunately for Mora, no expert ever testified that
the lifting incident caused Mora®s herniated disc. Mora also argued
that it didn't matter he didn't have evidence on this issue because
some of the court documents Hemco filed allegedly admitted that the
herniated disc happened when Mora picked up the jig and because Hemco
paid Mora's medical bills. The court rejected this argument. Voluntarily
paying an employee®s medical bills is not an admission that the medical
condition that generated those bills was caused by the on-the-job
injury. Moreover, the document®s references to an on-the-job injury
were not unequivocal and deliberate judicial admissions. Finally,
the appellate court said that the trial judge acted properly in not
allowing Mora to re-open evidence on the issue of medical causation
after he had rested his case.
Lesson: This case demonstrates that the courts require employees
of nonsubscribers to strictly comply with the law and prove all of
the elements of their case in order to obtain recovery. Paying medical
bills under an injury benefit plan is not evidence of an admission
of liability. Paying the medical bills and offering wage benefits
often keeps employees from suing. Even if they do sue, you are still
entitled to a credit on the judgment for those payments you have
TXANS Knowledge Center
offers a variety of information on responsible
and is a member-only benefit for TXANS members
and suppliers. If you are a TXANS member or
supplier, click here to
log in to TXANS Knowledge Center. If you
would like to obtain a password, please contact
TXANS at firstname.lastname@example.org.
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NEW LAW REQUIRES CERTAIN BUSINESSES TO ADOPT INJURY CONTROL PLANS
Texas hospitals, including general or special
hospitals, private mental hospitals, licensed
a nursing homes and others are now required
to adopt and implement policies to identify,
assess, and develop strategies to control the
risk of injury to patients and nurses associated
with the lifting, transferring, repositioning
or movement of patients.
The new law created by Senate
Bill 1525 requires the establishment
of a process that at a minimum includes:
- Analysis of the risk of injury to both
patients and nurses posed by the patient
handling needs of the patient populations
served by the hospital or nursing home and
the physical environment in which patient
handling and movement occurs.
- Education of nurses in the identification,
assessment and control of risks of injury
to patients and nurses during patient handling.
- Evaluation of alternative ways to reduce
risks associated with patient handling, including
evaluation of equipment and the environment.
- Restriction, to the extent feasible, with
existing equipment and aids of manual patient
handling or movement of all or most of a
patient's weight to emergency, life-threatening
or otherwise exceptional circumstances.
- Collaboration with and an annual report
to the nurse staffing committee.
- Procedures for nurses to refuse to perform
or be involved in patient handling or movement
that the nurse believes, in good faith, will
expose a patient or nurse to an unacceptable
risk of injury.
- Submission of an annual report to the governing
body or the quality assurance committee on
activities related to the identification,
assessment, and development of strategies
to control risk of injury to patients and
nurses associated with the lifting, transferring,
repositioning, or movement of a patient.
In developing architectural plans for constructing
or remodeling a hospital, nursing home or a
unit of a hospital or nursing home in which
patient handling and movement occurs, the facility
must consider the feasibility of incorporating
patient handling equipment in the physical
space and what construction design is needed
to incorporate that equipment.
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of Responsible Nonsubscribers-TXANS and
is distributed by TXANS for the exclusive use
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and supplier companies. Copyright TXANS all
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for consultation with a competent professional adviser. Before making
a decision or taking any action, you should consult a nonsubscriber
more information or to contact us directly,
please visit www.txans.org l ©TXANS