Attorney Liability under ERISA: Myth or Reality? Lawyers May Not Be "Fiduciaries," but That Won't Help Them Escape Non-Fiduciary Exposure, Particularly as Forecast by a Recent Decision

IN THIS new millennium, lawyers retained to perform for plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. [section] 1001 et seq., face the exposures from client for professional errors. Lawyers can be liable if they negligently perform for an ERISA-governed plan, just as in other areas of law. Liability under ERISA, however, is unlikely. Yet, recent decision by the U.S. Supreme Court suggests that ERISA exposure could exist and be substantial. A related concern is that exposure under ERISA's remedial provisions is not likely to be covered under conventional professional liability insurance. FIDUCIARY LIABILITY The fundamental exposure under ERISA liability is for fiduciaries of an ERISA plan. A primary purpose of ERISA is to protect employee benefit plans by establishing standards of conduct, responsibility and obligations for fiduciaries of plans. (1) Fiduciaries are personally liable under ERISA for breaches of duty to an ERISA covered plan. 29 U.S.C. [section] 1109. A who commits breach is responsible for any resulting monetary losses to the plan. The is also subject to such other equitable or remedial relief as the court may deem appropriate. 29 U.S.C. [section] 1109(a). Although attorneys occupy relationships with clients, this does not confer ERISA status on attorneys representing ERISA-governed plans. Under ERISA, fiduciary is defined as one who (1) exercises authority or control over plan management, administration or disposition of plan assets, or (2) renders investment advice for fee or other compensation. 29 U.S.C. [section] 1002(21)(A). ERISA status in this latter category requires, according to the regulations issued pursuant to the statute, that the investment advice be rendered (1) by one having discretionary authority or control ... with respect to purchasing or selling securities or (2) on basis. 29 C.F.R. [section] 2510.3-21(c)(1). ERISA also creates status for persons named as fiduciaries in the plan instrument or identified as by an employer or employee organization. 29 U.S.C. [section] 1102(a)(2). Attorneys who perform on behalf of plan are seldom designated as fiduciaries in the plan documents. Thus, attorneys must perform more than the usual professional services to be considered an ERISA fiduciary. (2) The inquiry requires functional examination of the lawyer's services. For example, an attorney whose engagement is limited to counseling the plan on compliance issues or otherwise acting solely in an advisory capacity is not plan under ERISA. (3) Although the retention will not create status under ERISA, there are situations in which attorneys have crossed the line. For example, in Mason Tenders District Council Pension Fund v. Massera, (4) because the attorney provided regular input concerning plan investments, there was an inference that he was under ERISA. Similarly, in Bouton v. Thompson, (5) lawyer who had authority to make withdrawals from bank account holding ERISA plan assets exercised the requisite degree of control over the plan to be fiduciary. Thus, attorneys are not completely insulated from liability under ERISA, but the instances in which they are can be regarded as exceptions rather than the rule. Because ERISA defines fiduciary in functional terms as one having control over plan assets, management or administration, and most engagements for lawyer's legal do not extend to tasks, ERISA's liability provisions portend minimal exposure for attorneys. NON-FIDUCIARY LIABILITY Another source of liability for attorneys retained by plan is under ERISA's party in interest liability provisions. Attorneys do not need to be ERISA fiduciaries to trigger exposure, because party in interest is defined as a person providing services to covered plan. …