Court Finds False Pension Info an ERISA Fiduciary Breach

October 18, 2002 ( - Giving an employee of a subsidiary of Lockheed Martin Corp. false information about his retirement benefits was a fiduciary duty violation under ERISA, a federal appeals court ruled.

The US 6 th Circuit Court of Appeals said the violation occurred when the employee was told he had to be on “active payroll” to be credited for his prior years of service for the purposes of a retirement incentive plan.

According to a report in Washington-based legal publisher BNA, plaintiff Stephen McGrath had worked as a Lockheed-Georgia structural engineer from 1964 to 1970. In 1974, he began working for Union Carbide in Tennessee, which was later acquired by Martin Marietta Corp., which later merged with Lockheed Martin Corp.

McGrath became an employee of Lockheed Martin Energy Systems, a subsidiary of Lockheed Martin.

According to the BNA report, McGrath asked the Energy Systems benefits plans administrator in December 1995, to credit his seven years of prior service at Lockheed-Georgia to his 21 years of credited service at Energy Systems under the Energy Systems’ pension plan.

Case History

The BNA report includes the following history:

On May 9, 1996, the administrator told McGrath no former Lockheed service was being restored. On May 7, 1996, without the administrator’s knowledge, the pensions operations director sent the human resources department a memo stating that in three years, pension service would be aggregated for vesting purposes.

On June 13, 1996, the administrator told McGrath that she did not know when a decision would be made regarding crediting service, but it might be another three years before Lockheed service might be credited.

On November 22, 1996, McGrath was laid off. On Dec. 31, 1996, McGrath wrote the administrator asking her to accept his application for an immediate benefit upon his layoff date from Lockheed Martin, calculated upon 34 years of service. The administrator responded that McGrath was not being credited for his seven year of prior service.

After McGrath went to court over the matter, the US District Court for the Eastern District of Tennessee found that Energy Systems and its pension plan administrator breached their ERISA fiduciary duties by misrepresenting pension rules to McGrath.

The appeals court upheld the lower court’s decision.

The case is McGrath v. Lockheed Martin Corp., 6th Cir., No. 00-6601, unpublished 10/9/02.