Outside counsel gives SFHSS board comprehensive fiduciary training; members press for regular refreshers
August 12, 2021 | San Francisco City, San Francisco County, California
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Chris Sears of the law firm Ice Miller delivered a detailed fiduciary training to the San Francisco Health Service System board on Aug. 12, focusing on the legal duties and practical steps trustees must take when overseeing health plans and trust funds.
Sears outlined who qualifies as a fiduciary, the sources of fiduciary duties (charter provisions and common law, with federal ERISA standards cited as a guide), and core duties including loyalty (exclusive‑benefit rule), prudence (including diversification and monitoring), proper delegation with vetting and oversight, and the obligation to document process. He emphasized that fiduciaries can be personally liable for breaches and that the best defense is a documented, prudent process: minutes, RFPs, vendor vetting, and expert advice where needed.
Board Q&A: Commissioners asked about remedies for breaches, whether individual board members should buy personal fiduciary‑liability insurance, and the recommended cadence for training. Sears said California law provides indemnification for public employees in many circumstances but deferred detailed statutory interpretation to the city attorney. City Attorney backup Jennifer Donilon indicated the board’s attorney Eric Rapoport will provide a thorough legal briefing at a subsequent meeting. Sears recommended new‑member orientation plus a comprehensive refresher roughly every 2–3 years; several commissioners argued for a two‑year cadence for practical refreshers.
Why it matters: The SFHSS board oversees plan administration, appeals and the trust that holds plan assets; decisions on vendor selection (including PBMs), appeals, and investments raise fiduciary obligations and potential personal liability. Commissioners emphasized pharmacy benefit managers and vendor fees as areas requiring careful scrutiny and clearer transparency.
Follow‑up: Staff and counsel agreed to return with clarifications on indemnification and with materials to support board members (charter excerpts, investment policy statement, vendor selection policy). The board recorded no public callers during the Q&A.
Sears outlined who qualifies as a fiduciary, the sources of fiduciary duties (charter provisions and common law, with federal ERISA standards cited as a guide), and core duties including loyalty (exclusive‑benefit rule), prudence (including diversification and monitoring), proper delegation with vetting and oversight, and the obligation to document process. He emphasized that fiduciaries can be personally liable for breaches and that the best defense is a documented, prudent process: minutes, RFPs, vendor vetting, and expert advice where needed.
Board Q&A: Commissioners asked about remedies for breaches, whether individual board members should buy personal fiduciary‑liability insurance, and the recommended cadence for training. Sears said California law provides indemnification for public employees in many circumstances but deferred detailed statutory interpretation to the city attorney. City Attorney backup Jennifer Donilon indicated the board’s attorney Eric Rapoport will provide a thorough legal briefing at a subsequent meeting. Sears recommended new‑member orientation plus a comprehensive refresher roughly every 2–3 years; several commissioners argued for a two‑year cadence for practical refreshers.
Why it matters: The SFHSS board oversees plan administration, appeals and the trust that holds plan assets; decisions on vendor selection (including PBMs), appeals, and investments raise fiduciary obligations and potential personal liability. Commissioners emphasized pharmacy benefit managers and vendor fees as areas requiring careful scrutiny and clearer transparency.
Follow‑up: Staff and counsel agreed to return with clarifications on indemnification and with materials to support board members (charter excerpts, investment policy statement, vendor selection policy). The board recorded no public callers during the Q&A.
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