ERISA Fiduciary Held Liable for Self-Dealing

The Sixth Circuit recently affirmed a trial court’s judgment against Blue Cross and Blue Shield of Michigan (“BCBSM”) finding that the entity engaged in “self-dealing” in violation of section 1106(b)(1) of ERISA, by reporting inflated charges for services it paid as a third-party administrator for Hi-Lex Corp.  BCBSM collected this additional revenue in addition to the “administrative fee” it charged Hi-Lex each month for each of the 1,300 employees covered under the Plan. The facts of this case are unique in that BCBSM breached a duty it owed to the Plan as a fiduciary, but it is heartening that a Circuit Court has enforced the fiduciary principles of ERISA.

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