By:\u00a0 Alan M. Levy<\/p>\n\n\n\n
What happens when employee benefit plan participants are not accurately informed of their rights?\u00a0 Who is liable for an error or a failure to inform a participant or beneficiary about their eligibility for benefits?\u00a0 The best protection for a plan fiduciary is often a clear, well-written current plan document.<\/p>\n\n\n\n
Employers sponsor employee benefit plans and typically appoint an owner or management official to be the plan\u2019s official administrator.\u00a0 Insofar as that party controls collection, investment, or disbursal of a plan asset, he\/she is a fiduciary.\u00a0 Third party administrators (\u201cTPAs\u201d) who perform day-to-day plan operations dealing with participants typically insist on administrative agreements which state that the plan sponsor \u2013 not the TPA \u2013 is the fiduciary who must act \u201cwith an eye single for the interest of the participants and beneficiaries.\u201d\u00a0 Donovan v. Bierwirth<\/em>, 680 F.2d 263, 271 (2nd Cir. 1962); ERISA, \u00a7 404(A)(1).\u00a0 A fiduciary risks personal liability if he\/she causes a loss to a participant or beneficiary by failing to act \u201cin accordance with the documents and instruments governing the plan.\u201d\u00a0 ERISA, \u00a7 404(a)(1)(D).\u00a0 Two recent appellate decisions relied on adherence to those plan documents in dismissing breach of fiduciary duty allegations that participants and beneficiaries were not adequately informed of their benefit rights.<\/p>\n\n\n\n In Vest v. Resolute FP US Inc.<\/em>, 905 F.3d 985 (6th Cir. 2018) the United States Court of Appeals for the Sixth Circuit explained that a fiduciary may breach his\/her duty to disclose plan benefits and rules if \u201c(1) an early retiree asks a plan provider about the possibility of the plan changing and receives a misleading or inaccurate answer or (2) a plan provider on its own initiative provides misleading or inaccurate information about the future of the plan or (3) ERISA or its implementing regulations required the employer to forecast the future and the employer failed to do so.\u201d\u00a0 Id<\/em>. at 987.\u00a0 The surviving beneficiary in that case alleged a fiduciary breach because neither the TPA nor the fiduciary informed the deceased employee that he had a right to convert his group life insurance coverage to an individual policy when he ceased employment.\u00a0 The case was dismissed, in part, because the plan\u2019s summary plan description gave sufficiently clear information to satisfy any notification obligation.<\/p>\n\n\n\n In DeRogatis v. Bd. of Trustees of the Welfare Fund of the IUOE Local 15<\/em>, 904 F.3d 174 (2nd Cir. 2018), the Second Circuit reached a similar conclusion.\u00a0 The widow of a deceased employee alleged that two \u201cnon-fiduciary, ministerial employees\u201d on the plan staff had given her husband incorrect information, causing her to receive less than maximum survivor benefits.\u00a0 Therefore, she claimed, the individual trustees should be held liable for a breach of their fiduciary duty because they failed to adequately supervise the plan employees\u2019 work.\u00a0 The court rejected the trustees\u2019 defense that they could not be liable for any unintentional misrepresentations made by the non-fiduciary administrative staff, but went on to rule against the widow because the: <\/p>\n\n\n\n \u201csummary plan description (\u201cSPD\u201d)\nclearly communicated the eligibility requirements for the various pension and\nsurvivor benefits available . . . thereby satisfying the . . . fiduciary duty\nto provide complete and accurate information.\u201d<\/p>\n\n\n\n Id<\/em>. at 179.<\/p>\n\n\n\n These cases demonstrate the importance of clear, accurate, and timely plan documents.\u00a0 Whether or not the TPA or the office staff fail to explain rules and procedures fully and correctly, the participants and beneficiaries may and must rely on the information in the plan documents.\u00a0 So long as the documents received by the participants are clear and correct, the fiduciaries have satisfied their obligation and should not be personally liable for any misunderstanding about the documents\u2019 statement of rights.<\/p>\n\n\n\n Should you have any questions about the obligations, duties, and protections of a plan fiduciary, or should your employee benefit plan documents need an update or a review, please contact me or another attorney here at Lindner & Marsack, S.C.<\/p>\n","protected":false},"excerpt":{"rendered":" By:\u00a0 Alan M. Levy What happens when employee benefit plan participants are not accurately informed of their rights?\u00a0 Who is liable for an error or a failure to inform a participant or beneficiary about their eligibility for benefits?\u00a0 The best protection for a plan fiduciary is often a clear, well-written current plan document. Employers sponsor […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[19],"tags":[],"class_list":["post-580","post","type-post","status-publish","format-standard","hentry","category-employee-benefits"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p5WrIF-9m","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/posts\/580","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/comments?post=580"}],"version-history":[{"count":4,"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/posts\/580\/revisions"}],"predecessor-version":[{"id":584,"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/posts\/580\/revisions\/584"}],"wp:attachment":[{"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/media?parent=580"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/categories?post=580"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lindner-marsack.com\/news\/wp-json\/wp\/v2\/tags?post=580"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}