Court Affirms no Fiduciary Breach in Miscalculated Benefit Estimates

April 18, 2008 ( - The 1st U.S. Circuit Court of Appeals has affirmed a district court's determination that miscalculations of pension benefits by a human resources employee and a plan's online payment calculator did not constitute a fiduciary breach under the Employee Retirement Income Security Act (ERISA).

In affirming summary judgment for Gillete Company (See Miscalculation of Benefits not a Fiduciary Breach ), the appellate court pointed out that in cases alleging breach of ERISA fiduciary duty, the question is not whether the actions of a person adversely affected a plan beneficiary’s interest, but whether the person was acting as a fiduciary. The court said the human resources employee who provided John W. Livick with an incorrect estimate of his benefits was performing a purely ministerial function and was not a fiduciary.

Livick argued that his case was similar to those in which an employee was given misleading information while seeking advice about the security of his future benefits, but the appellate court noted that all Livick sought and received was an estimate, and there was no effect on his benefits which had already accrued, nor was he using the information to choose among different options. The court also rejected Livick’s assertion that Gillette breached its fiduciary duty when it hired, retained, and failed to properly train the HR representative to perform such non-fiduciary tasks, saying the Department of Labor’s interpretation of the relevant ERISA provisions says that a named fiduciary can be liable for the acts and omissions of a person designated to carry out fiduciary responsibilities.

According to the opinion, Livick conceded that he understood the plan terms, and he is receiving the pension that he was guaranteed under the terms of the Plan. Therefore, the court said, it was unreasonable for him to rely on informal communications which contradicted clear plan terms.

Livick was employed by Parker Pen Company, which was acquired by Gillette. He received a letter from Gillette explaining that his years of service with Parker Pen would not count in the calculation of his pension benefits under the Gillette plan.

After being notified of his involuntary termination, Livick consulted with a benefits counselor regarding his monthly pension benefit. The counselor, as well as an online benefit calculator, provided Livick an estimate that was more than $2,000 a month greater than the actual benefit he received. Livick claimed he based his subsequent employment decisions on this miscalculation.

His appeal to the plan for a benefit amount equal to the estimates he was given was denied, so Livick sued Gillette and the plan.

The opinion in Livick v. Gillette Co., D. Mass., No. 05-11094-JLT, 6/12/07 can be found  here .