As a result of industry consolidation over the years, employers can find themselves responsible for pension plans of companies long out of existence. A recent federal district court decision imposed a penalty of $4,470 on a plan administrator who delayed providing the widow of a plan participant with the plan document in effect 34 years ago.
The case involved an employee who worked for a company for 24 years until his retirement in 1976. He turned 55 in 1979 and began receiving benefits in the form of a single life annuity which, of course, provided no survivor benefit after his death. He died in April of 2011, at which point his widow contacted the company’s corporate successor to inquire about survivor benefits. She claimed that her husband had consistently told her she would be entitled to a survivor annuity and that she had never signed a waiver of spousal benefits.
The widow and her attorney spent a fair amount of time trying to get information from the successor company. The successor had outsourced benefit questions to a call center which ultimately told the widow to quit calling. The company finally sent the participant’s election form and after the litigation commenced, located the summary plan description in effect at the time that the election form was signed. The employer claimed that it had made a good faith effort to retain relevant documents, but that it administers pensions for over 40,000 participants in over 50 plans and should be excused for being unable to find all plan documents.
The court did not accept the employer’s plea that it should not be penalized for having failed to provide the information sooner. The court noted that there was no evidence in the record regarding the steps that the company had taken to try to locate the documents. The company had also not been forthcoming with the widow with respect to the status of the plan documents and her appeal for a survivor benefit. The widow was never clearly told the decision of the company regarding her claim nor how to appeal that decision and had had many fruitless calls with the call center about her claim. In light of the foregoing, the widow was awarded a $10/day penalty for the time it took the company to provide the documents after they were requested (more than one year). This was much less than the maximum penalty of $110/day, but nevertheless amounted to over four thousand dollars.
Employers should do their best to keep good records of old plan documents, particularly for defined benefit plans where benefit determinations can relate back many, many years. They should also communicate with claimants and the courts regarding their good faith efforts to locate documents. Employers who fail to take these steps may be penalized.