Fiduciary Duty Is No Longer Theoretical
This is not hyperbole.
It’s pattern recognition.
When Schlichter Bogard entered retirement plan litigation years ago, the industry didn’t immediately grasp what was happening. At first, the cases were treated as outliers. Aggressive. Unusual. Maybe even overreaching.
In hindsight, they were none of those things. They were the beginning of systemic change.
Schlichter Bogard’s impact on the retirement plan world is now well documented:
- Three unanimous Supreme Court victories
- Over $750 million secured in settlements
- Industry-wide fee reductions estimated at $2.8 billion annually
- A fundamental reshaping of how recordkeepers, advisors, and plan sponsors operate
Jerry Schlichter didn’t pursue those cases to extract quick settlements. He pursued them to establish precedent. The settlements followed because once precedent is established, behavior has no choice but to change.
That history matters now, because the firm has entered healthcare.
Why This Moment Is Different
For years, ERISA health plan litigation followed a predictable pattern. When something went wrong, lawsuits typically targeted the plan sponsor (an employer or union fund). Sometimes a carrier or third-party administrator would be named. But benefits consultants — despite their influence over plan design, vendor selection, and compensation structures — were generally treated as advisors operating at arm’s length.
That separation created a form of insulation.
The assumption was simple: we advise, we don’t decide. And because of that framing, fiduciary accountability often stopped short of the parties shaping the most consequential financial decisions in healthcare.
The new healthcare ERISA cases challenge that assumption directly.
Schlichter Bogard has named major consulting firms as defendants, asserting that when compensation structures, incentives, and steering behaviors are embedded in advisory relationships, fiduciary duty does not disappear. It intensifies.
The Allegations That Changed the Conversation
The details matter, because ERISA is not a law of vibes or norms. It is a law of outcomes, incentives, and prudence.
Among the allegations being examined:
- Commissions as high as 40% of premiums
- Loss ratios as low as 25–35%, meaning only 25–35 cents of every dollar paid by employers went toward claims
- Book-of-business overrides that reward consultants for steering employers toward higher-commission products
- Compensation models that systematically prioritize consultant revenue over participant value
At some point, numbers stop being abstract.
When commissions approach 40% and loss ratios fall to 25–35%, it becomes increasingly difficult to argue that the arrangement reflects prudent plan management. And when compensation is explicitly structured to reward steering, the long-standing “we just advise” defense begins to collapse under its own weight.
This is not about accusing every advisor of misconduct. It’s about whether business models built around conflicted incentives can coexist with ERISA’s duty of loyalty and prudence.
Fiduciary Duty Was Always There
It’s important to be precise here: nothing about ERISA changed when these cases were filed.
Health plans governed by ERISA have always been subject to fiduciary standards. The duty of loyalty. The duty of prudence. The obligation to act solely in the interest of plan participants.
What changed is the industry’s tolerance for treating those duties as theoretical.
For years, healthcare operated in a gray zone where ERISA technically applied, but enforcement lagged behind complexity. Disclosure was treated as sufficient. Conflicts were normalized. Incentives were rarely interrogated as fiduciary risks.
That gap is closing.
As one experienced plaintiff-side ERISA attorney, Julie Selesnick, put it: “Big consulting firms should be very worried about this.” Her perspective comes from decades spent representing employees, retirees, union funds, and employers harmed by exactly the kinds of practices now under scrutiny.
She understands how these firms structure their defenses. She knows where legal exposure sits. And she recognizes what it means when Schlichter enters a new domain.
Where Ethos Fits In This Moment
Ethos Benefits was not founded in anticipation of THIS litigation.
It was founded on the belief that healthcare should be governed like the trust it is.
Long before lawsuits forced the issue, Ethos operated under a fiduciary framework that treated conflicts as risks, not footnotes. Compensation structures were interrogated. Incentives were aligned deliberately. Plan dollars were treated as trust assets because, legally, that’s what they are.
This approach was not always convenient. It often meant challenging entrenched norms. But it was grounded in a simple premise: ERISA is not optional, and fiduciary duty is not contextual.
What’s unfolding now doesn’t feel like disruption. It feels like alignment.
The law didn’t move. Healthcare is finally being asked to.
The Broader Implication for Employers
For plan sponsors, this moment isn’t about panic. It’s about clarity.
As fiduciary standards are enforced more rigorously, employers will need to ask harder questions:
- How are our advisors compensated?
- Where do incentives point?
- Do our arrangements withstand a prudence analysis, not just a disclosure review?
These questions were always appropriate. They are now unavoidable.
History shows that when fiduciary law is applied seriously, industries adapt. Business models evolve. And those who aligned early spend less time explaining later.
Healthcare is entering that phase now.
And fiduciary governance is no longer theoretical.
Worried how this applies to your business? We got you.
Contact Ethos Benefits for a fiduciary framework and a get a free analysis now. Find out what your legal blind spots are.
