THE FIDUCIARY CORNER: Employee Handbooks May Increase ERISA Risk
Gregory L. Ash, Sunday, October 01, 2006 | Filed under: Fiduciary Duties
In addition to summary plan descriptions that describe benefits offered to employees, employers often describe such benefits – along with dress codes, vacation policies, and other employment rules – in employee handbooks. Doing so, however, can create additional fiduciary risk.
Attempting to describe benefit programs in any level of detail in an employee handbook carries with it the chance that this description might conflict with the description in the plan document or the SPD. When conflicts like this arise, courts generally interpret the disparate provisions in the manner that is the most beneficial to employees. Thus, employee handbooks generally should include only a cursory summary of ERISA-covered benefits, with a specific disclaimer that the actual terms of those benefits are governed by the plan documents.
Imprecise language in a handbook may also have the unintended effect of creating an ERISA plan where one was not intended. The U.S. Court of Appeals for the Eleventh Circuit relied in part on language in a handbook to reach just such a conclusion. (Moorman v. UNUM Provident). The handbook identified a fully-insured, voluntary disability benefit as part of the sponsor’s “employee benefit package.” The sponsor undoubtedly had intended for this benefit to fall within the safe-harbor exemption from ERISA coverage that applies to voluntary insurance benefits that are not sponsored or endorsed by the employer. In this case, however, mentioning the benefit in the handbook was evidence that the employer had, indeed, sponsored the benefit. The bottom line: Handbook language should be carefully reviewed by benefits counsel.