Court Rejects Discrimination Suit Against Prudential Plan

August 23, 2006 (PLANSPONSOR.com) - The 3rd Circuit US Court of Appeals ruled that a company did not breach its fiduciary duties by failing to tell a former worker about a 2002 plan amendment, which allowed employees to take lump sum distributions.

The three-judge panel said the 2002 amendment that applied only to current employees did not affect Joseph Bennett who resigned from Prudential Insurance Co. of America in 1980. Bennett was eligible to begin receiving benefits in November 2004. Two months before his retirement benefits were to kick in, he told the company he wanted a lump sum payout, but the company twice denied his requests and suggested he appeal his request to the Retirement Plan Administrative Committee.

Under the plan, a participant could only get a lump sum payment if the benefits of the plan were under $5,000, or if the participant was granted additional benefits following involuntary separation from the job. Bennett met neither condition.

Bennett instead filed a discrimination suit with the US District Court for the District of New Jersey, which rejected his request, ruling that Bennett’s benefits claim had not been exhausted before he filed the suit, that there was no discrimination because an Employee Retirement Income Security Act (ERISA) plan may treat its participants differently, and that Prudential had no duty to tell Bennett about the 2002 amendment.

The appeals court upheld the district court’s ruling. The appeals court said that under ERISA, a viable claim must be based on adverse decisions in the employer-employee relationship and not mere changes in the level of benefits. The appeals court said Prudential’s 2002 amendment offering lump sum distributions to its employees did not change its relationship with Bennett because he had voluntarily resigned in 1980.

For the full opinion of the appeals court go here .

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