In February 2024, a Johnson & Johnson employee filed a class action alleging the company paid its PBM more than $10,000 for a 90-pill prescription that retailed for under $80 cash. The case named not just J&J, but the individual members of its benefits committee.
Whether or not the suit ultimately prevails (a district court dismissed it on standing grounds in January 2025 and similar claims have followed against JPMorgan Chase and others), the message to every self-funded plan sponsor is unmistakable. The era of passive health plan oversight is over.
Fiduciary intelligence is how plan sponsors respond.
What Is Fiduciary Intelligence?
Fiduciary intelligence is the operational discipline of running a self-funded health plan with the data, processes and documentation needed to satisfy ERISA's prudent-person standard on a continuous basis.
Traditional fiduciary compliance asks, "Did we sign the right documents this year?" Fiduciary intelligence asks, "Can we prove today, with evidence, that every material decision about this plan was made in the sole interest of participants and at reasonable cost?"
Think of it as the difference between owning a smoke detector and running a fire-safety program. Both involve fire. Only one will help you when the inspector arrives.
The concept emerged from two converging pressures: a sharp expansion in what regulators and courts expect of group health plan fiduciaries and a new generation of analytics tools that finally make those expectations achievable.
Why Self-Funded Plans Face Heightened Fiduciary Risk
ERISA Section 404(a) requires plan fiduciaries to act solely in the interest of participants, with the care, skill, prudence and diligence of a person familiar with such matters. For decades, this standard was litigated mostly against 401(k) sponsors. Group health plans got comparatively little attention.
That has changed. Three forces converged.
1. The Consolidated Appropriations Act of 2021.
CAA Section 202 requires brokers and consultants expecting $1,000 or more in compensation to disclose all direct and indirect compensation to plan fiduciaries in writing. Plan fiduciaries are explicitly required to review those disclosures for reasonableness.
The CAA also removed gag clauses that historically prevented plan sponsors from accessing their own claims data. This eliminated a common excuse for not knowing what the plan was paying.
2. A new wave of class actions.
Lewandowski v. Johnson & Johnson (D.N.J., 2024) alleged the plan paid $10,239.69 for a 90-pill teriflunomide prescription available elsewhere for $28 to $77.
Similar suits have been filed against JPMorgan Chase and Wells Fargo. Even where defendants prevail, defense costs run into the millions and benefits committee members are named personally.
3. DOL enforcement priorities.
The Employee Benefits Security Administration (EBSA) has signaled that health plan compensation disclosures and prudent vendor selection are active enforcement areas, not paperwork.
The result: self-funded plan sponsors now sit roughly where 401(k) sponsors sat in 2010. On the leading edge of a litigation curve that is not going to flatten.
The 5 Pillars of Fiduciary Intelligence
Data Transparency and Claims-Level Visibility
You cannot prudently manage what you cannot see. Fiduciary intelligence starts with the contractual right and technical ability to access detailed claims data by member, provider, drug and procedure. Post-CAA, any vendor refusing this access is a red flag, not a normal counterparty.
Vendor and PBM Accountability
PBM contracts are the single most common source of fiduciary risk in self-funded plans. Spread pricing, rebate retention, formulary steering toward affiliated specialty pharmacies and "specialty generic" reclassification can each cost a mid-sized plan seven figures annually. Fiduciary intelligence means contracts with clear definitions, audit rights and performance guarantees. And the willingness to enforce them.
Fee Benchmarking and Reasonableness Documentation
Reasonableness under ERISA is not an opinion. It's a comparison. Fiduciaries need documented benchmarks for TPA fees, PBM economics, broker compensation, stop-loss premiums and point-solution vendor pricing. Benchmarks should be refreshed regularly and tested through RFPs at appropriate intervals.
Continuous Plan Performance Monitoring
A prudent committee reviews the plan more than once a year. Quarterly dashboards covering cost trend, high-cost claimants (de-identified), network performance, Rx mix, prior authorization patterns and member experience turn fiduciary oversight from anecdote into evidence.
Documented Decision-Making and Audit Trails
If a decision isn't documented, it didn't happen. At least not in front of a judge. Fiduciary intelligence means board-style minutes for every committee meeting: what was discussed, what alternatives were considered, what was decided and why.
How Fiduciary Intelligence Differs From Traditional Plan Management
What Plan Sponsors Should Actually Do: An Action Framework
Red Flags That Signal a Fiduciary Intelligence Gap
- You don't have direct access to your own plan's claims data
- Your broker's compensation is bundled, opaque or "paid by the carrier"
- Your PBM contract is more than three years old and has never been benchmarked
- Your committee has no written minutes or meets only at renewal
- No one on staff can answer: "When did we last document the reasonableness of our TPA fees?"
- You rely on a single advisor's recommendation without independent validation
- Stop-loss, PBM and TPA all flow through the same vendor with no daylight between them
If three or more of these describe your plan, you have exposure that is straightforward to remediate. But only if you start.
The ROI of Getting This Right
Fiduciary intelligence is not a cost center. Self-funded plans that adopt the disciplines above typically capture 8 to 15% reductions in total plan spend within 18 to 24 months. Most of it comes from PBM renegotiation, network steerage corrections and elimination of duplicate or low-utilization point solutions.
Add the avoided cost of litigation defense (commonly $2M to $10M even in dismissed cases), reduced personal liability exposure for committee members and measurably better participant outcomes from cleaner formularies and steerage. The math is straightforward.
The plans that struggle with fiduciary intelligence are not the ones that can't afford it. They're the ones that haven't yet realized they can't afford to skip it.
Frequently Asked Questions
What is fiduciary intelligence in simple terms?
Fiduciary intelligence is the practice of running a health plan with the data, process and documentation needed to prove at any moment that decisions were made prudently and in participants' interest. It replaces annual compliance checkboxes with continuous, evidence-based oversight.
Who is a fiduciary under ERISA for a self-funded plan?
Anyone with discretionary authority over plan administration or plan assets is a fiduciary, regardless of title. This typically includes the plan sponsor, named fiduciaries, benefits committee members and sometimes officers who appoint them. Fiduciary status flows from function, not job description.
What is the difference between fiduciary intelligence and fiduciary compliance?
Compliance asks whether required documents and filings exist. Fiduciary intelligence asks whether the underlying decisions were prudent, documented and defensible. You can be compliant on paper while still breaching your duty in substance.
Can a TPA, broker or PBM be a fiduciary?
Sometimes. If they exercise discretionary authority over plan administration or assets such as deciding claims appeals or unilaterally setting fees, they can be functional fiduciaries. Many contracts try to disclaim this, but courts look at actual conduct, not contract language.
What are the penalties for breach of fiduciary duty?
Fiduciaries can be held personally liable to restore plan losses, disgorge profits, pay civil penalties under ERISA Section 502(l) and cover plaintiffs' attorneys' fees. The Department of Labor can also pursue removal and prohibition from future fiduciary roles.
