Untrustworthy: ERISA’s Eroded Fiduciary Law

The trust law analogy has come to dominate judicial thinking about employee benefit plans. Yet despite its rise to rhetorical prominence, ERISA fiduciary law has been dramatically transformed by a series of uncoordinated, low-visibility judicial decisions on multiple fronts. These apparently unconnected case law developments reveal a startling pattern of mutually reinforcing restrictions on ERISA’s protection of pension and welfare benefits. This study chronicles ERISA’s trust law turn to expose how untrustworthy workers’ benefit safeguards have become.

Both the scope and the intensity of fiduciary oversight have been radically pruned back in the courts. Notwithstanding the congressional declaration that attempts to relax workers’ federal fiduciary protections “shall be void as against public policy,” the Supreme Court has shown the way to curtail fiduciary obligations. That de facto or implicit exculpation, combined with unilateral employer control over both plan terms and plan interpretation, indicate that the federal courts have defanged—or deranged—ERISA’s fiduciary regime. Despite their importance to personal financial security and overall economic welfare, workers repeatedly discover the fragility of the interests they earn under employer-sponsored health insurance and retirement savings programs.

The new property in employee benefits is, along multiple dimensions, remarkably weak property.