Responding to Participant Requests for Information
The Employee Retirement Income Security Act of 1974 (“ERISA”) regulates how employers respond to requests for plan-related information by participants and beneficiaries. No request for information should be taken lightly. We have represented many companies who have been sued over how they responded—or did not respond—to participants’ requests for information about a plan.
In one recent case we handled, a participant claimed she asked for information about early retirement benefits. The employee was already receiving benefits under a disability benefit plan sponsored by the company. She claimed that she asked questions about whether receiving early retirement benefits would adversely impact those disability benefits and was told that receiving early retirement benefits would have no effect on her disability benefits. In fact, under the disability plan, the early retirement benefits offset those disability benefits. The participant claimed that had she known that, she would not have elected to begin receiving the early retirement benefits, but instead would have waited until her normal retirement date.
A dispute arose over whether the participant actually asked specific questions about the relationship between the two plans. Regardless of whether any such conversation ever took place, we argued that the retirement plan itself was clear that, once a participant elected to begin receiving retirement benefits, the election could not be reversed (and that the disability plan spelled out the offset). The participant sued the company, claiming that she received erroneous advice.
We argued that absent extraordinary circumstances, and unless the employer is interpreting an ambiguous plan term, it cannot be liable to participants and beneficiaries who claim to have relied on the purportedly bad advice. So, although there was a dispute about whether the employer actually gave the advice that the participant claimed it did, it didn’t matter because there was no ambiguous term in the plan. And, in any event, the participant admitted that her discussions with the employer did not relate to any specific provision in the plan document—in fact, she admitted she never looked at the plan document during the course of her discussions with the employer.
Fortunately for our client, the court agreed with our arguments, holding that the case did not involve the extraordinary circumstances required for an employer to be held liable for giving allegedly incorrect advice about plan benefits. In other words, an employer’s oral statements about what the plan provides or doesn’t provide generally cannot be used to accomplish a result other than what the plan itself actually requires.
Although the case had a happy outcome for our client, it still teaches several lessons. First, employers should have a plan in place for fielding inquiries from participants. Although the law favors plan sponsors with respect to claims that they gave improper advice, there are exceptions to the general rule. Whenever a participant asks for information regarding plan benefits, the most prudent course of action is to direct the participant to the plan document.
The law also requires plan administrators (in many cases, the plan sponsor) to provide certain documents to participants and beneficiaries “upon written request.” Some documents required to be produced—the latest updated summary plan description and annual report—are easy to identify. However, the law also requires administrators to provide “other instruments under which the plan is established or operated,” and has effectively left it up to the courts to decide whether the documents requested in a given case fall into that category.
Failure to timely provide documents in response to such a request can give rise to significant monetary penalties. Consequently, any time a participant requests—particularly in writing—plan-related documents, plan sponsors should be sure to respond promptly and fully. If there is ever any question whether the employer is obligated to produce the requested documents, it should promptly seek advice from a qualified employee benefits attorney.
Any tax advice contained in this communication (including any attachments) is neither intended nor written to be used, and cannot be used, to avoid penalties under the Internal Revenue Code or to promote, market or recommend to anyone a transaction or matter addressed herein.
© 2009
Reish Luftman Reicher & Cohen, A Professional Corporation. All rights reserved. The ERISA Controversy Report is published as a general informational source. Articles are general in nature and are not intended to constitute legal advice in any particular matter. Transmission of this report does not create an attorney-client relationship. Reish Luftman Reicher & Cohen does not warrant and is not responsible for errors or omissions in the content of this report.
Learn more about R&R related practice areas:
ERISA Litigation
