http://www.mwbb.com/services/exec.htm
ERISA Plan Administrator's Expanded Duty to Notify Participants
ERISA plan participants who claim they relied on misleading or erroneous information (or on the Company's failure to provide a clear explanation), can recover damages for breach of fiduciary duty under the theory adopted by a number of recent ERISA cases.
The Third Circuit Court of Appeals recently held a plan administrator liable for breach of fiduciary duty for failing to notify a plan participant of its interpretation of an ambiguous plan provision regarding "breaks in service." "[W]hen a material plan provision regarding severance is ambiguous and beneficiaries might predictably rely on an alternate interpretation, a fiduciary may be held liable for failing to inform them that their service has been broken at a time at which they could attempt corrective action or seek alternatives," the court said. Harte v. Bethlehem Steel Corp., 3rd Cir., No. 98-2052, 2/29/00.
This means that the funded retirement plan will not pay the benefit (because the plan administrator's interpretation is upheld as reasonable), but the plan administrator (presumably the Employer) will pay the "benefit" as damages for fiduciary breach.
The Third Circuit's decision is similar to a number of other recent "failure to notify" cases in the Courts of Appeal. For example, the Ninth Circuit ruled in Bins v. Exxon Co. U.S.A., 189 F.3d 929 (9th Cir. 1999) and Wayne v. Pacific Bell, 189 F.3d 982 (9th Cir. 1999) that an employer had an "affirmative duty" to disclose to plan participants that the Company was seriously considering implementing an early retirement incentive plan. See also McCauley v. IBM, 165 F.3d. 1038 (6th Cir. 1999) and Krohn v. Huron Memorial Hospital, 173 F.3d 542 (6th Cir. 1999); Shea v. Esensten, 107 F.3d 625 (8th Cir. 1997); Hockett v. Sun Co., 109 F.3d 1515 (10th Cir. 1997) and Estate of Becker v. Eastman Kodak Co., 120 F.3d 5 (2nd Cir. 1997). These cases all held that an ERISA fiduciary has a duty to communicate accurate information about benefit plans.
This line of cases effectively expands the duties of ERISA disclosure beyond the specific statutory disclosures required in ERISA. As indicated in these cases cited here, this claim also raises the risk that the benefit will have to be paid directly by the employer outside the trust fund intended to fund those benefits.
For more information contact:James P. McElligott,
Jr.
Partner
McGuire Woods Battle & Boothe,
LLP
One James
Center
Richmond, Virginia
23219
804-775-4329
804-698-2111(fax)
jpmcelli@mwbb.com
McGuire Woods provides a variety of legal services in the following cities:
Almaty
(7-3272-608-300) Atlanta
(404-443-5500)
Baltimore
(410-659-4400) Brussels
(32-2-629-42-11)
Charlotte
(704-373-8999)
Charlottesville (804-977-2500)
Chicago
(312-849-3699)
Jacksonville (904-798-3200)
New York (212-319-1572)
Norfolk (757-640-3700)
Richmond
(804-775-1000) Tysons Corner
(703-712-5000)
Washington
(202-857-1700) Moscow (7-502-937-0774) - Of
Counsel
**********************************
The McGuire Woods e-mail lists are intended to provide information of general interest to the public and are not intended to offer legal advice about specific situations or problems. McGuire Woods does not intend to create an attorney-client relationship by offering this information, and anyone's review of the information shall not be deemed to create such a relationship. You should consult a lawyer if you have a legal matter requiring attention.