Employer Deemed Plan Administrator and Fined After Failing to Provide Plan Information
Lawrence Jenab, Tuesday, August 01, 2006 | Filed under: 401(k) Plans, ERISA Litigation, Fiduciary Duties, Pension Plans
ERISA guarantees plan participants and beneficiaries the right to request and receive certain information about their plans. If the plan administrator receives such a request and fails to respond within 30 days, ERISA authorizes the federal courts to impose statutory penalties on the administrator. According to a recent district court decision, those penalties may be assessed against the plan sponsor – even if the plan identifies someone else as the plan administrator – when the identity of the plan administrator is unclear and the sponsor either “acts like” the plan administrator or makes it difficult for participants to locate the plan administrator. In Minadeo v. The Glidden Co., the relevant plan documents identified the plan administrator, variously, as the “retirement committee” and the “pension committee.” When a participant seeking information about her retirement benefit was unable to determine the identity of any such committee (it had, in fact, been disbanded), she instead made several requests for plan information from her employer. When her employer failed to respond, the participant filed suit in federal court.
The employer pointed to ERISA, under which only the plan administrator is subject to such penalties, and to the plan documents, which named “the committee” as such. Because the sponsor was unable to provide any evidence that “the committee” existed, and because there was evidence that it had controlled plan administration and held itself out as the plan administrator, the court rejected the sponsor’s argument and held it liable for the statutory penalties. (The amount of the employer’s liability remains to be determined, but the requested award was $323,000 for penalties, plus attorneys’ fees.)
This case highlights yet again the fact that actions, rather than labels, carry weight in the context of fiduciary responsibility under ERISA. In particular, it demonstrates the importance of properly allocating fiduciary responsibility and then carefully documenting that allocation.
In this case, the plan’s ERISA obligation was so simple as to seem trivial: it needed to provide the participant with a few documents. The plan sponsor’s carelessness in delegating its fiduciary responsibilities to a plan administrator instead opened the doors of the courthouse to the participant. And the court – forced, in the absence of a proper delegation, to follow the path of fiduciary responsibility to its source – had no choice but to sanction the sponsor.