The 10th U.S. Circuit Court of Appeals agreed with a district court’s finding that the Employee Retirement Income Security Act’s (ERISA’s) nonforfeitability provisions cannot be interpreted to mean that the plan must act as “insurer against any and all wrongful actions by third parties.” The plan paid the benefits according to its procedures and plan terms, and rightfully determined it should not pay the benefits twice because of William Foster’s failure to comply with his obligations to ensure the plan had his correct address. The plan had sent a new PIN for accessing his account to the address it had on file.
The appellate court concluded that “nonforfeitable” does not mean “guaranteed,” and that the plain language of the law says “it is the claim to the benefit, rather than the benefit itself, that must be ‘unconditional’ and ‘legally enforceable against the plan.’” Foster’s claim to his benefits was “unconditional” insofar as it was not conditioned upon any further employment or action on his part. He was fully vested and the plan did not attempt to impose any impermissible conditions on Foster’s right to claim benefits.
The court found that the employer and plan did nothing wrong. The decision to process account withdrawals was based on receipt of a procedurally sound request. According to the court’s opinion, Foster was fully informed of how the plan would allow him access to his money, and that someone with the correct User ID and PIN would be treated as the legal participant for purposes of processing withdrawals.
Foster failed to notify the plan of his new address until 15 months following his split from his wife. In the meantime, the plan mailed a document to the Foster home describing changes in how participants would access their accounts (see “401(k) Participant at Fault in Account Withdrawal Dispute”). It included an explanation of how a User ID created by the participant would replace the social security number for identification purposes. Foster’s ex-wife received the document and made an online request to put in place a new User ID, which the plan confirmed in April 2005. The following month, she changed the account password, changed the listed permanent address to a post office box and withdrew $4,000 from the account. During the next several months, she drained the account.
The 10th Circuit’s opinion in Foster v. PPG Industries Inc. is at http://www.ca10.uscourts.gov/opinions/10/10-5123.pdf.