Appeals Judges OK Plan Document Fine

April 8, 2004 (PLANSPONSOR.com) - A federal appeals court has upheld a $35,050 penalty assessed against a retirement plan that didn't respond to a beneficiary's request for plan information.

The ruling by the U.S. 7 th Circuit Court of Appeals came in a case involving plaintiff George Lowe who sued McGraw-Hill Companies for not supplying him with relevant documents relating to how his wife took a retirement plan distribution from her McGraw-Hill retirement plan, according to Spencer Benefits Reports. The plan claimed Mrs. Lowe had opted for a single-life annuity, which meant her husband was entitled to nothing after her death.

According to the appellate court ruling, Lowe found the same distribution form that his wife had signed but Lowe’s copy didn’t have a check mark in the single-life annuity box, as there was on the plan’s copy. Lowe requested the documents about his wife’s benefits in July 1999 and enlisted the help of the U.S. Department of Labor (DoL), which eventually got the documents. However, the plan still didn’t give Lowe a copy of what it had sent to the DoL.

Lowe sued the plan in January 2001 in the U.S. District Court for the Northern District of Illinois. While the suit was pending, that summer, the plan gave Lowe the documents he had requested. At the same time, the plan acknowledged that Lowe had a right to survivor benefits of $278 per month because his signature on the form waiving surviving spouse’s rights had not been witnessed or notarized.

The lower court federal judge awarded Lowe the survivor benefits in the amount the plan had acknowledged owing him, plus statutory penalties of $35,050 determined by multiplying $50 per day by the 701 days that had elapsed between the plan’s deadline for giving Lowe the documents he had requested and the date on which it finally did give them to him, as well as $19,275 in attorneys’ fees.

On appeal, the plan argued that its records concerning Mrs. Lowe were “in disarray” because it had just acquired her employer, and that it believed that Lowe had waived survivor benefits. Therefore, the plan argued that the court should be lenient in assessing penalties.

The case is Lowe v. McGraw-Hill Companies, Inc., et al. (Nos. 03-1888 and 03-1954).

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