Let’s say you have a concern about how your 401(k) plan is operating. Maybe participant loans aren’t getting repaid or a service provider has neglected to allocate forfeitures on an annual basis. So you consult a lawyer. The lawyer writes a memo outlining the situation and advising on corrective steps. You drop the memo in your 401(k) file. Then the Department of Labor (“DOL”) comes calling and asks to look at your plan administrative documents. You would like to withhold the lawyer’s memo as confidential “attorney–client” communications. Can you do that? Or do you have to produce the memo - and give the DOL a roadmap on how to assert a claim against you or other in-house fiduciaries?
The answer is that the memo actually has to be produced because legal advice about plan administration is likely to be subject to the “fiduciary exception” to the protection normally afforded by the attorney–client privilege. The rationale is that the fiduciary seeking legal advice is doing so in a representative capacity n behalf of all plan participants. As such, the fiduciary cannot conceal material information about fiduciary communications from participants and others acting on their behalf - like the DOL. As summarized by one court:
"[As] applied in the ERISA context, the fiduciary exception provides that an employer acting in the capacity of ERISA fiduciary is disabled from asserting the attorney-client privilege against plan beneficiaries on matters of plan administration."
Exceptions may apply in the case of legal advice to an employer concerning plan design issues and other “settlor” functions. Also, legal advice to a plan fiduciary with respect to a pending benefit dispute with a plan participant may still be confidential on the basis of the attorney–client or work-product privilege. But employers, most of whom act as both the plan sponsor (a non-fiduciary role) and plan administrator (a fiduciary role), need to proceed with care in seeking advice on plan-related matters.
Recommendations: If you have a problem and require outside advice, by all means get the help you need. But consider how you want to proceed with legal advice. Use of independent ERISA legal counsel may help sustain the attorney-client privilege. Also bear in mind that by having your plan service providers (third party administrator or “bundled” provider) communicate through ERISA counsel, the attorney-client privilege can be extended to them and keep their work-product confidential from both aggrieved participants and government regulators.
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