Plan Description Protects Against Inaccurate Benefits Estimates

According to the opinion, Duane Christensen was considering retirement when he requested an estimate of his benefits from the Qwest Pension Plan. He then retired, at which point Qwest told him his monthly benefits would be $1,484 per month with the annuity option, rather than the $1,754 per month estimate the plan gave him before he retired.

The plan allows for benefits estimates by e-mail or by telephone, but includes this caveat: “These estimates are not binding; if a mistake is made, you will be paid the corrected amount, even if less than the estimated amount.”  

According to the opinion, Christensen requested five such estimates before he retired, with estimates all topping $1,700.    When he retired, he received a letter saying that his monthly benefits would be $1,764, again with a disclaimer that a final audit might change the amount. The final audit found an error in the estimate and reduced the amount Christensen would receive to $1,484 per month, an amount he conceded he was due.

After Qwest rejected Christensen’s claim for the greater amount, he sued the plan and the plan’s administrators – Qwest Pension Plan Employee Benefits Committee – saying they violated the Employee Retirement Income Security Act (ERISA) by providing incorrect estimates.

The court affirmed a lower court’s decision, which found that there “is no evidence that any fiduciary authorized, participated in, or knew about the estimating error, and no evidence that the defendants acted in bad faith, deliberately misled Christensen, or failed to exercise due care in dealing with Watson Wyatt” – the company that provided the estimates.

The appeals court rejected Christensen’s argument that the plan breached its fiduciary duty because it knowingly caused him to retire based on materially overstated benefits, saying that “this contention ignores the undisputed evidence that participants were warned in the Summary Plan Description and again in the benefit estimate that estimates were non-binding and subject to a final determination of the benefits.”

For the full opinion go  here .