The U.S. District Court for the Northern District of Illinois recently dismissed breach of fiduciary duty claims leveled against an actuary in the case Chua v. Shippee (N.D. Ill., 2013) . The case arose out of a 412(i) life insurance plan, which the IRS had disallowed and penalized the sponsor and participants. The taxpayers sued an actuary who had been involved in giving advice about the plan for breach of fiduciary duties. The court dismissed the claims, because being a fiduciary requires control over the plan or discretionary authority over the administration of the plan or its assets.
Being an actuarial service provider to a plan, is not enough to establish a fiduciary relationship, said the Court, regardless of whether the actuary's advice is relied on:
As with the Reish defendants, plaintiffs also fail to allege adequately that Shippee was engaged in fiduciary functions. Plaintiffs have adequately alleged that Shippee gave them what amounted to bad advice, but that does not make him a fiduciary. Nor does the fact that the plaintiffs relied upon and followed Shippee's bad advice make Shippee a fiduciary. Pappas v. Buck Consultants, Inc., 923 F.2d at 538. Plaintiffs' allegations make it clear that the decisions remained with plaintiffs.
The court in Chua v Shippee, emphasized the fact that the clients always retained the final decision-making authority and so the elements for a fiduciary duty were not established.
From a legal liability standpoint, actuaries do not want to be considered fiduciaries. The duty of care of a fiduciary is higher; the scope of the duty can sometimes include liability for breaches of co-fiduciaries; and the statute of limitations may be different. Fiduciaries under ERISA may be sued by plan participants while non-fiduciaries generally cannot.
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