Appeals Court Declares Plan Service Provider Transamerica Not a Fiduciary, Not Guilty of Breach

The U.S. Ninth Circuit Court of Appeals has reversed a California district court ruling and vacated that lower court’s class-action certification in Santomenno v. Transamerica Life Insurance Company.

The plaintiffs, who were participants in several ERISA-governed retirement plans for which Transamerica provided investments and services, alleged that Transamerica was a plan fiduciary and breached its duties in that role. The breaches allegedly occurred in Transamerica’s negotiating with plans the compensation for its services, in withdrawal of fees from participant accounts, and in its receipt of revenue sharing payments from investment managers associated with the plans.

As noted in the Court’s opinion, the appeals court found that the statutory fiduciaries to the plans were the employers, not Transamerica, although it is possible for a service provider to become a functional fiduciary. The court pointed out that its ruling follows precedent set by other appeals courts that have found such negotiations between service providers and plans not to be fiduciary acts, noting further that fees withdrawn from participant accounts had been disclosed, and that the revenue sharing payments—also previously disclosed—were received from investment managers, not participant accounts.