First Circuit Allows ERISA Retained Asset Account Claim To Proceed

Previously published November 12, 2008

On November 6, 2008, the U.S. Court of Appeals for the First Circuit overturned the dismissal of a complaint against an insurer asserting breaches of fiduciary duties under ERISA where the insurer paid life insurance benefits by means of a retained asset account. In so ruling, the court rejected arguments by the insurer (1) that payment through the retained asset account was the equivalent of a lump sum payment and (2) that the breach of fiduciary duty claim was precluded by ERISA's guaranteed benefit contract provision.

Plaintiffs were beneficiaries under ERISA-governed life insurance policies issued to employers. When plaintiffs submitted claims for benefits, the insurer set up interest-bearing checking accounts for each plaintiff (often referred to as retained asset accounts) and sent plaintiffs checkbooks on which they could write checks up to the amount of the insurance proceeds. If the beneficiary wanted to transfer the