Compliance

ERISA Legality Claims Need Not Be Administratively Exhausted

An appellate court found 403(b) plan participants were questioning the legality of a plan amendment, which it said is for courts to decide.

By Rebecca Moore editors@plansponsor.com | March 24, 2017
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The 6th U.S. Circuit Court of Appeals has reversed a district court’s holding that participants in Cumberland University’s 403(b) plan must exhaust all administrative remedies under the plan before filing suit against the plan fiduciaries.

The appellate court found some claims questioned the legality of a plan amendment, which it said are issues for courts to decide.               

According to the court opinion, in 2009, the university adopted a 5% matching contribution, whereby the university would match an employee’s contribution to the plan up to 5% of the employee’s salary. On October 9, 2014, the university amended the plan to replace the 5% match with a discretionary match, whereby the university would determine the amount of the employer’s matching contribution on a yearly basis. The university made the amendment retroactive effective January 1, 2013. It announced that the employer matching contribution for the 2013–14 year and the employer matching contribution for the 2014–15 year would be zero percent. 

The court also noted that as of the date of oral argument in the case on January 25, 2017, the university had not produced a summary plan description subsequent to the 2009 Summary Plan Description despite plaintiffs’ repeated requests.

On November 12, 2015, the plaintiffs filed a class action complaint against the defendants alleging wrongful denial of benefits on behalf of the benefits class (Count I); anti-cutback violation on behalf of the benefits class (Count II); failure to provide notice on behalf of the notice class (Count III); and breach of fiduciary duty on behalf of the benefits and notice classes (Count IV). 

NEXT: Exhaustion of administrative remedies would be futile.

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