The U.S. District Court for the Eastern District of Virginia concluded the plan abused its discretion in denying Francine Helton’s claim for retroactive benefits because it did not engage in a reasoned and principled decision-making process, and the determination is not supported by substantial evidence.
U.S. District Judge Gerald Bruce Lee said the defendants failed to comply with the Employee Retirement Income Security Act (ERISA’s) disclosure requirements because they failed to employ a method of distribution that was reasonably calculated to ensure actual receipt in sending out the requisite disclosures of material changes to the plan. They also breached their fiduciary duty by failing to respond to or correct Helton’s apparent misunderstanding when she asked whether it was correct that she was not eligible to receive benefits until age 65.
However, the court held that Helton is not entitled to monetary damages as a remedy because double recovery of retroactive benefits is not appropriate equitable relief for the defendants’ violation.
Helton terminated from AT&T in May 1997 at age 50, and because she did not have the 20 years of service required by the plan, she was not eligible to begin receiving even a reduced pension until age 65. According to the court opinion, Helton said she did not request any information about the pension benefits at the time she left because she “always understood” that she would not be eligible to receive benefits until she reached age 65.
However, in 1997, the defendants introduced a Special Update to the plan which included a change to the “pay- based average period” used to calculate benefits, which allowed participants to elect their benefits at age 55 without any reduction for age. The Special Update took affect August 1, 1997.
The plan’s denial of Helton’s claim was based on its finding from a April 28, 1997 letter and 1998 and 2004 Summary Plan Descriptions that were sent to Helton and contained information about the changes, so she should have been aware. Helton claims she did not receive these documents.
The court noted that a witness from Universal Mailing Services (UMS), which AT&T used for its mass mailings, testified that it verified addresses with the U.S. Postal Service and any that came back incorrect were sent back to AT&T, which would then send UMS the corrected addresses. There was no testimony as to what happened when a person’s address was incorrect and AT&T did not correct the address.
An example of a mailing that involved approximately 14,000 errors was presented to the court, demonstrating that large numbers of errors were not uncommon.
In addition, the records show that Helton’s question about not being eligible for benefits until age 65 was sent via e-mail to AT&T’s Pension Service Center, but there is no record of a response.
The case is Helton v. AT&T, Inc.
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