In the case of Testa v. Becker, plaintiff Robert Testa filed the lawsuit in January 2010 against his retirement plan, the Xerox Corporation Retirement Income Guarantee Plan (RIGP) and its administrator. In the suit, Testa alleged that his pension benefits had been reduced in violation of the Employee Retirement Income Security Act (ERISA).
While the suit was originally filed with the U.S. District Court for the Central District of California, proceedings were transferred to the U.S. District Court for the Western District of New York in April 2010 based on a forum selection clause in one of the plan documents.
Testa worked for the Xerox Corporation over several periods, starting in 1972, and was a participant in the RIGP. When he left Xerox in 1983, he took a lump-sum distribution of the then-present value of his pension benefit. He returned to work for Xerox in 1985 and then finally retired in August 2008.
In the suit, Testa alleged his benefit was calculated by Xerox to be significantly lower than it should be, due to a “phantom account” offset. This practice involves Xerox’s deduction from a participant’s pension benefit, not only of the amount of the lump sum that the participant received when he first left Xerox, but also a sum representing the hypothetical interest that the lump sum would have earned had it remained in the pension plan till the employee’s retirement at the end of his final period of employment with Xerox.
The district court acknowledged this case was one of several dealing with claims by current and former employees of Xerox, relating to their pension benefits and the application of the phantom account (see “Groups Urge Court to Give Judicial Deference to Plan Administrator”).
Four causes of action were submitted as part of Testa’s lawsuit. The first two were for pension benefits, under ERISA Section 502(a)(1)(B). The first cause was based on the text of the RIGP and the second on disclosures contained in the summary plan description. The third and fourth causes dealt with accusations of a breach of Xerox’s fiduciary duties under ERISA Section 502(a)(3).
The defendants (Xerox) moved to dismiss Testa’s lawsuit, mostly on the grounds that the claims were time sensitive, as well as the fact that the seeking of benefits under the plan needed to be sought under ERISA Section 502(a)(1)(B) and not ERISA 502(a)(3) asserted by Testa in his suit.
While the first, second and fourth causes of action from the suit were dismissed by the court, Testa’s third claim was not. U.S. District Judge David G. Larimer wrote that in regard to that third claim, “For purposes of the motion to dismiss, the court need not determine precisely when plaintiff’s claim arose. The salient fact, for purposes of the present motion, is that the record as it now stands does not warrant dismissal of plaintiff’s claim under ERISA Section 502(a)(3) as time-barred. Defendants’ motion to dismiss plaintiff’s third cause of action is therefore denied.”
As to why the other causes of action were dismissed, Larimer pointed to the relevant Kunsman decision by the court, which said Xerox’s summary plan description “constituted a repudiation of the plaintiff’s claims that the phantom account should not have been applied.” Also referenced was the case of Harrison v. Digital Health Plan, which supported the court’s assertion that Testa could not “recast his claims for benefits under the plan, or the summary plan description, in the guise of a claim for breach of fiduciary duty.”
The full text of the document from the U.S. district court can be found here.