The Chimes Decision: A Fiduciary's Roadmap for Health Plan Defense
- May 5
- 5 min read
A nonprofit prevailed against the DOL in one of the first health plan excessive-fee cases. Here's exactly how they did it — and why it matters for every self-funded plan fiduciary in 2026.
The Chimes decision (2019) established a critical point: health plan fiduciaries face the same ERISA duties as retirement plan fiduciaries. But the defendants didn't win by having the lowest fees. They won by documenting a prudent process:
Regular TPA evaluation (not "set and forget")
Peer benchmarking
Fee renegotiations over time
Independent outside auditing
Claims process monitoring
With Schlichter now naming Gallagher, Mercer, and Lockton in health plan lawsuits, this roadmap is more relevant than ever. The question isn't whether your fiduciary process will be scrutinized. It's whether you can defend it when it is.
What Happened in the Chimes Case
In 2019, a nonprofit employer prevailed over the Department of Labor in one of the first ERISA excessive-fee cases targeting a health plan, not a 401(k). The Acosta v. Chimes District of Columbia decision didn't just vindicate one plan sponsor. It created a documented roadmap that every self-funded health plan fiduciary should study.
The DOL sued Chimes DC, a government contractor that employs disabled workers, alleging ERISA fiduciary violations related to its self-funded health and welfare plan. The government's claims included:
Excessive fees paid to FCE Benefit Administrators (the TPA)
Excessive fees paid to Benefits Consulting Group (the broker)
Charitable donations from vendors to the Chimes Foundation constituted prohibited "kickbacks"
This was significant: previously, ERISA excessive fee litigation focused almost exclusively on retirement plans. Chimes signaled that health plan fiduciaries face the same scrutiny — and the same personal liability.
Why the Defendants Won: The Procedural Prudence Roadmap
The court found that Chimes' fiduciaries demonstrated a prudent process for monitoring service providers. Not perfect. Not the cheapest. Prudent.
Here are the nine documented actions that protected them:
Regular review of TPA selection prudence — Showed ongoing evaluation, not "set and forget"
Monitored providers at industry conferences — Demonstrated awareness of market alternatives
Spoke with peer organizations — Benchmarked fees informally against similar plans
Renegotiated fees over time — Achieved actual cost reductions (2005-2016)
Held annual meetings with TPA and trustees — Documented consistent oversight cadence
Reviewed annual reports — Maintained informed decision-making
Required outside auditing — Independent verification of plan operations
Monitored administrative and claims processes — Tracked operational performance metrics
Relied prudently on advisors — Used industry materials and external sources
The critical insight: Documentation was the defense. Not having the lowest fees, but having a defensible process for evaluating them. ClaimInformatics' independent oversight platform helps plan sponsors create exactly this documented process.
Critical Legal Holdings Every Fiduciary Should Know
RFPs Are Not Required. "ERISA does not require fiduciaries to 'scour the market' to find the cheapest option for participants and has no requirement that fiduciaries engage in a formal written RFP process." The court accepted that informal searches can be the "functional equivalent" when limited options exist — but you need evidence of the search.
"Best Value" Approach Is Acceptable. The court found that seeking "best value" — not just the lowest price — demonstrates prudence. Looking for a good fit that meets plan needs and provides the best benefits is exactly what fiduciaries should do.
Monitoring Duty Requires "Reasonable Intervals." Citing DOL Interpretive Bulletin 75-8, the court explained the duty to monitor requires review "at reasonable intervals as required to ensure satisfactory performance." Annual review was sufficient in 2019 — but today's heightened enforcement environment may require more.
Charitable Donations Were Not Kickbacks. The charitable contributions weren't treated as personal account transactions by Chimes DC, so they weren't prohibited transactions under ERISA. Context and documentation mattered.
What's Changed Since 2019 — And Why It Matters Now
Chimes won in 2019. But the litigation landscape has intensified dramatically:
Schlichter Bogard's health plan playbook: The firm that extracted $6B+ in 401(k) settlements is now aggressively targeting health benefits, naming major brokers as co-defendants
CAA disclosure requirements: Section 202 and 408(b)(2) equivalents now apply to health plans, creating new documentation obligations
DOL enforcement priorities: The Department has signaled increased focus on health plan fiduciary compliance
High-profile defendants: Wells Fargo, Johnson & Johnson, JPMorgan, Kraft Heinz — all facing health plan fiduciary breach claims
The Chimes roadmap still works. But implementing it effectively now requires more than annual meetings and informal benchmarking.
Implementing the Chimes Roadmap: What Plan Sponsors Need
The Chimes decision validates that a good fiduciary process is the principal defense. But most self-funded plan sponsors lack the tools to create that documented process:
Claims data access: Without detailed claims data, you can't benchmark TPA performance or verify accuracy
Independent monitoring: The court cited favorably that Chimes required outside auditing — but who audits your TPA?
Documentation infrastructure: Ongoing monitoring requires systematic tracking, not just annual meetings
Conflict-free analysis: If your "independent" reviewer has carrier relationships, is it truly independent?
Frequently Asked Questions
Does the Chimes decision mean I don't need to do an RFP for TPA services? The court said formal RFPs aren't required under ERISA. However, you do need evidence of a prudent selection and monitoring process. Whether that's a formal RFP or "functional equivalent" depends on your market and circumstances, but documentation is essential either way.
What counts as "reasonable intervals" for monitoring service providers? The DOL Interpretive Bulletin referenced in Chimes suggests review "at reasonable intervals as required to ensure satisfactory performance." Annual review was sufficient in 2019, but given today's litigation environment, quarterly or ongoing monitoring may be more defensible.
How do I document fiduciary prudence for my health plan? The Chimes roadmap includes: regular TPA evaluation meetings (documented), benchmarking against peers, fee negotiations over time, annual report reviews, independent auditing, and claims process monitoring. The key is creating a paper trail that demonstrates ongoing attention, not just results.
Does having higher-than-average TPA fees expose me to liability? Not necessarily. The Chimes court accepted that unique plan characteristics (in their case, a disabled workforce and Service Contract Act complexity) can justify higher-than-median fees. What matters is whether you can document why those fees represent reasonable value for your specific plan.
Is the Chimes precedent still relevant in light of recent Schlichter lawsuits? Yes — more relevant than ever. Chimes established that health plan fiduciaries face the same duties as retirement plan fiduciaries. The documented process that won in Chimes is exactly what you need to defend against the new wave of health plan litigation.
The Bottom Line
The Chimes decision demonstrates that health plan fiduciaries can prevail over the DOL. But the defense requires documentation of a prudent process, not just good intentions or favorable outcomes.
In today's litigation environment, implementing the Chimes roadmap means having access to claims data, independent monitoring capabilities, and systematic oversight documentation. Most plan sponsors can't do this alone.
Ready to build your fiduciary defense? Schedule a consultation to discuss how independent claims analysis can document your prudent oversight process.
Comments