Plan Violated Fiduciary Duty by Not Fully Revealing Distribution Options
U.S. District Judge, David A. Katz, of the U.S. District Court for the Northern District of Ohio ruled in favor of the estate of Allen Anderson against the Northwest Ohio United Food and Commercial Workers Union and Employers’ Joint Pension Fund.
Katz ruled that an Employee Retirement Income Security Act (ERISA) fiduciary has a duty to inform beneficiaries of their material circumstances and other beneficial information under the plan. By not advising Anderson about a 10-year certain pension option, the administrator acted imprudently and without regard to the participant’s best interest, the court found.
According to the ruling, Anderson worked for 30 years for a Kroger grocery store in Ohio, and participated in the Northwest Ohio United Food and Commercial Workers Union and Employers’ Joint Pension Fund. After his terminal cancer diagnosis, the ruling said, Allen contacted the fund’s administrator, National Employee Benefit Administrators (NEBA), to talk about his situation.
NEBA informed Allen he could return to work for two weeks and then take another leave of absence with the same disability and health insurance benefits; retire and receive retiree health insurance; Katz noted that would not cover his future costly medical treatment.
The other option would be to retire and continue his health insurance under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The problem according to Katz: NEBA never told Allen about a 10-year certain pension that would have provided Allen’s heirs significantly greater benefits after his death than the other options provided.
A Need to Disclose
Katz was unconvinced by the fund’s argument that it did not need to provide information to Allen about the 10-year certain option because Allen said he wanted to beat his cancer and return to work and did not specifically request information about that option. That does not excuse a fiduciary from explaining pension options that are in an employee’s best interest, Katz asserted.
Allen ultimately decided to return to work for two weeks so he could take another medical leave of absence. During that time, he filled out a pension application on the advice of his union—the United Food and Commercial Workers Union—but was told that it would not be processed until he authorized the fund to do so. Allen returned to Kroger’s active payroll in October 2005, but died from his cancer the following month.
Allen’s brother and executor of his estate, Paul Allen, submitted a claim for benefits under the 10-year certain option, but the fund determined that Allen’s estate and heirs could not posthumously collect on that option because it was only available if a participant retired and received his first month’s pension check before dying. Paul Allen later took his fight to the courts.
The case is Anderson v. Board of Trustees of the Northwest Ohio United Food and Commercial Workers Union and Employers’ Joint Pension Fund, N.D. Ohio, No. 3:07 CV 576, 7/28/08.