Participant Seeking Benefits Due Cannot Claim Fiduciary Breach

December 19, 2007 ( - The U.S. District Court for the District of Columbia has ruled a plan participant cannot move forward with fiduciary breach claims against her former employer when she has adequate remedy under her claim for additional benefits due to her.

The court noted in its opinion that the majority of circuits that have decided on the issue of whether participants can pursue an Employee Retirement Income Security Act (ERISA) § 502(a)(3) fiduciary breach claim while also pursuing a claim for additional benefits under § 502(a)(1)(B) have held that the breach of fiduciary duty claim cannot stand where a plaintiff has an adequate remedy through a claim for benefits under § 502(a)(1)(B). The court said that since the part of Denise M. Clark’s complaint that weighed most heavily against her employer was that she was improperly denied benefits, it would follow the majority of circuits in its ruling.

Clark ‘s claim for relief for the fiduciary breach was also denied because she was seeking individual damages. The court pointed out in its opinion that ERISA § 502(a)(2) allows for relief on behalf of the plan for fiduciary breaches and not on behalf of individual participants or beneficiaries.

Clark ‘s claim for additional benefits due to her was the only charge allowed to go forward by the court.

Clark worked as an attorney at Feder, Semo and Bard, P.C. (FS&B) for almost ten years. Based on the law firm’s retirement plan documents, she believed she was vested under the plan and would receive her accrued benefits five years after she terminated her employment in 2002.

However, in September 2003, the Board of Directors of FS&B amended the plan to freeze the accrual of future retirement benefits, and in 2005, terminated the plan. Clark received a letter stating all benefits would be distributed as a result of the plan termination that included a statement indicating she was entitled to a lump sum benefit of $166,541.71.

Clark believed she was entitled to more, and requested the lump sum distribution while reserving the right to pursue any difference between the distribution and the value of her accrued benefits. After inquiring about the benefits calculation, she received an email from outside counsel for FS&B informing her that the lump sum actuarial equivalent of her $4,860.55 per month annuity benefit was $312,380.83, but her benefits had been “pro-rata reduced to match the plan’s assets.”

After exhausting all her remedies under the plan attempting to receive additional benefits, Clark filed a lawsuit alleging she was improperly denied almost 50% of the value of her retirement benefits in violation of ERISA’s anti-cutback protection for accrued benefits, ERISA’s disclosure requirements, and fiduciary duties imposed by ERISA.

The opinion is here .