Miscalculation of Benefits not a Fiduciary Breach

June 14, 2007 (PLANSPONSOR.com) - The U.S. District Court for the District of Massachusetts has determined that miscalculations of pension benefits by a human resources employee and a plan's online payment calculator do not constitute a fiduciary breach under the Employee Retirement Income Security Act (ERISA).

Granting summary judgment for the Gillette Company, the district court said the act of calculating a benefit estimate was a ministerial duty and not an act of discretionary authority over the plan. Further, the court determined that Gillette’s hiring of the human resources benefits counselor who provided the estimates to John W. Livick was also a purely ministerial function and therefore did not constitute a fiduciary breach.

According to the opinion, Livick had no claim for benefits under ERISA because Gillette’s errors were errors in estimation and reporting, not representations that unjustly enriched the company by depriving Livick of specific funds to which he was entitled. The court further pointed out that ruling otherwise would go against ERISA’s policy of ensuring that benefits are paid consistently and predictably in accordance with a written plan.

While both the benefits counselor and the online calculator estimated Livick’s benefit based on his years of service with Gillette and with his prior employer, the court noted the plan was unambiguous in stating that benefits would only be calculated based on a participant’s time at Gillette.

Livick was employed by Parker Pen Company, which was acquired by Gillette. He received a letter from Gillette explaining that his years of service with Parker Pen would not count in the calculation of his pension benefits under the Gillette plan.

After being notified of his involuntary termination, Livick consulted with a benefits counselor regarding his monthly pension benefit. The counselor, as well as an online benefit calculator, gave Livick an estimate that was more than $2,000 greater than the actual benefit he received. Livick claimed he based his subsequent employment decisions on this miscalculation.

His appeal to the plan for a benefit amount equal to the estimates he was given was denied, and Livick then sued Gillette and the plan.

The case is Livick v. Gillette Co., D. Mass., No. 05-11094-JLT, 6/12/07.