ERISA: A Co-Fiduciary Has No Right to Contribution and Indemnity

Because retirement plans involve large amounts of money, large numbers of people, and fiduciaries with conflicts of interests, Congress designed ERISA to differ from traditional trust law to meet these specific needs and important policy concerns. Before ERISA, fiduciaries and employers often manipulated lack of oversight and conflict of interests to the detriment of the beneficiaries. ERISA raised the standards owed by fiduciaries and established a policing system that required professional fiduciaries to monitor non-professional fiduciaries, thereby forcing non-professional fiduciaries to leave the field or seek expert advice. These provisions created co-fiduciary liability by imputing the liability of the co-fiduciary to an innocent fiduciary and in general creating an atmosphere of transparency and security. Congress considered the possibility of contribution and indemnity in two limited applications. First, exculpation provisions under ERISA generally banned indemnity except in limited circumstances. Second, insurance provisions allowed a type of contribution, if the plan paid the premiums. The Supreme Court has remained true to the Congressional scheme and denied court implied contribution and indemnity. Parties to private pension plans have the power to specify the plan terms as set forth in ERISA and may allocate liabilities amongst themselves. If they choose not to change the terms, then the intent and purpose of ERISA should control the interpretation of the plan and the fiduciaries responsibilities of the plan.