A federal district court judge ruled employees whose pension assets from a former employer’s plan were transferred to a new plan are entitled to benefits from the former employer because they were not notified of the transfer.

U.S. District Judge Tena Campbell of the U.S. District Court for the District of Utah said that because Southwestern Portland Cement Company (now known as CEMEX, Inc.) failed to give the statutorily required notice of the plan changes, it abused its discretion by denying benefits in the face of this lack of notice. Campbell cited previous court cases that recognized the purpose of Employee Retirement Income Security Act (ERISA) disclosure provisions is “to ensure that the individual participant knows exactly where he stands with respect to the plan.” She noted that ERISA requires the administrator to notify plan participants of plan changes by providing summaries of the amendments no later than 210 days after the end of the plan year in which the amendment is adopted. There was no evidence that Southwestern gave participants that notice after their pension assets were transferred.

According to the court opinion, Martin Marietta Corporation operated a cement plant in Leamington, Utah. On March 21, 1984, Martin entered into a lease agreement in which it agreed to lease the Leamington plant to Southwestern. The plaintiffs in the case were all employed by Southwestern at the Leamington plant from 1985 to 1989. Southwestern established the Southwestern Plan for its employees working at the Leamington plant. On March 31, 1989, Southwestern and Martin agreed to terminate the lease for the Leamington plant. The termination agreement provided that all Southwestern employees would be terminated and given the option to become Martin employees. It also directed that Southwestern would transfer pension plan assets to Martin to cover employees’ pension benefits for the years 1984 to 1989.

The plaintiffs chose to continue working for Martin at the Leamington plant and were given a pension plan sponsored by Martin that included their assets for their service with Southwestern. In March 2010, plaintiff Jeremy Skeem requested pension benefit information from CEMEX for his time as an employee of Southwestern. CEMEX investigated the request and contacted Martin, which confirmed it had responsibility for Skeem’s pension benefits. CEMEX later gave a full list of former Southwestern employees to Martin, and Martin it had pension assets for 33 people on CEMEX’s list for the period from 1984 to 1989, 14 of whom have received or were currently receiving retirement pension benefits from the Martin Plan (or one of its successor plans).

CEMEX issued a denial of benefits letter to Skeem stating that Martin had assumed the liabilities for the Southwestern pension plan for participants in the plan from 1984 to 1989. Skeem sued CEMEX for benefits.

Campbell noted that upon discovery in the case, CEMEX pointed to several provisions of the Southwestern Plan to counter the plaintiffs’ position that the failure to give notice entitles them to receive benefits. CEMEX also took the position that 29 U.S.C. § 1058, which applies to “mergers and consolidations of plans or transfers of plan assets,” is the only relevant statute to the situation and does not include a notice requirement. However, since CEMEX did not offer these explanations in the denial letter to Skeem or when the plaintiffs in the case first claimed they are entitled to benefits because they did not receive notice that the Southwestern Plan had transferred liabilities to the Martin Plan, “it may not provide this explanation now for the first time.”

Campbell concluded that since the plaintiffs did not receive notice, the transfer of pension assets is void and they have standing to assert claims for benefits against CEMEX.