The company asserted that the participant lacked standing to bring the suit, based on the fact that at the time of his retirement, the employee was not a participant in the retirement incentive plan. However, US District Judge Joan Lefkow of the US District Court of the Northern District of Illinois rejected this point finding that even though the employee was not a plan participant, his decision to retire was based in large part on the information given to him by the company’s human resource representatives.
With this determination, Lefkow rejected the company’s contention that the ERISA does not impose fiduciary duties on employers prior to the adoption of a retirement plan. Lefkow found the company still had a fiduciary obligation since it was the fiduciary of a separate, existing pension plan.
Probing further in to the case, Lefkow also determined thefiduciary breach did not occur through the company’s human resource representatives – who were determined not to be acting within this capacity under ERISA – rather through the company itself. The distinction was made based on the court’s interpretation of the authority given by the company to its representatives – in this case, the authority to speak on the company’s behalf.
“A fiduciary may be liable for the acts of a non-fiduciary where the fiduciary clothed that person with ‘apparent authority’ such that the plaintiff may reasonably rely on that person to provide the material information,” Lefkow wrote. Thus, in the case, the participant was reasonable in his reliance on those individuals to provide him with information about his retirement benefits.
Further, even though Lefkow found no evidence of a deliberate deception on the part of the company, a fiduciary breach occurred because information about the retirement incentive plan was “material” to the participant’s decision to retire. As such, Lefkow awarded damages to the plaintiff based on the amount of benefits that would have been received had the company enrolled him in the retirement incentive plan.
>Randall Beach was an employee of Commonwealth Edison Co. in the company’s transmission and distribution department. In 1997, after 31 years of service to ComEd, Beach began considering early retirement.
>At the time of his contemplation, Beach was aware that the company had offered 20 to 30 severance plans between 1994 and 1997. Attempting to determine of a similar plan would be available to him, Beach asked his supervisor and the company’s human resource representatives if ComEd planned to offer a severance plan or retirement incentive plan in the near future.
>Beach’s supervisor and several human resources representatives told Beach that the company was not considering any retirement incentive plan. Further, Beach was told that even if such a plan was in the works, his department would not be included. Based on this information, Beach retired in June of 1997.
>Six weeks after Beach’s retirement, the company announced a voluntary severance plan to eligible employees in the transmission and distribution department. The plan included severance pay, retiree health benefits, life insurance, and education and outplacement assistance.
>After news of the severance plan trickled to Beach, he contacted ComEd to request retiree health benefits. His request was denied based on the fact that he was not on the payroll as of the date the plan became effective.
>Beach sued, alleging that ComEd breached its ERISA fiduciary duties by misrepresenting the availability of the plan prior to his retirement.
The case is Beach v. Commonwealth Edison Co., Northern District of Illinois, Number 00 C 3357.
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