Compliance June 10, 2013

ERISA Imposes No Duty to Disclose Certain Information

June 10, 2013 (PLANSPONSOR.com) – An appellate court has held that the Employee Retirement Income Security Act (ERISA) does not impose a duty to provide retirement plan participants with nonpublic information affecting the value of the company’s stock.
Reported by

The 11th U.S. Circuit Court of Appeals said the case against SunTrust Banks (see “DOL Files Brief in SunTrust Stock Drop Case”) raises two questions: 

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

  • Does ERISA impose upon fiduciaries of an eligible individual account plan (EIAP) that offers the plan sponsor’s publicly traded stock as an investment option a duty to disclose material, nonpublic financial information about the plan sponsor beyond the specific disclosures mandated by ERISA and its implementing regulations? 
  • Does Section 404(a)(2) of ERISA, which exempts EIAPs that acquire and hold employer securities from ERISA’s diversification requirement, exempt fiduciaries of EIAPs from exercising their overarching duty of prudence under Section 404(a)(1) even when it is imprudent to acquire or hold employer securities in an EIAP? 

  

The appellate court said its recent decision in Lanfear v. Home Depot, Inc. (see “DOL Disputes Home Depot’s Win in Stock Drop Suit”), resolves the issues in this case. In Home Depot, the court found ERISA does not impose a duty to provide plan participants with nonpublic information affecting the value of the company’s stock. In addition, it found such a prudence claim was not a veiled diversification claim, and thus does not fall within the Section 404(a)(2) exemption.  

The 11th Circuit remanded the case back to the district court for further proceedings.  

The court’s opinion is here.
Compliance June 10, 2013

Release of Claims Bars Lawsuit for Pension Benefits

June 10, 2013 (PLANSPONSOR.com) – A pension plan participant who signed a release of claims when he was laid off cannot now pursue a claim for more benefits, a court ruled.
Reported by

The 7th U.S. Circuit Court of Appeals agreed with a district court that Omar Hakim had constructive knowledge of his ineligibility for benefits before he signed the release in exchange for separation benefits; therefore, the release barred his pension claim.  

According to the court opinion, in 1996, Accenture amended its pension plan to exclude a number of employees in various “service lines” throughout the company. When Hakim was promoted in 1999, he was promoted to a position in which he was no longer eligible to participate in the plan under the terms of the amendment.  

Get more!  Sign up for PLANSPONSOR newsletters.

Hakim’s lawsuit seeks additional benefits based on a lack of notice of the 1996 amendment to the plan in violation of the Employee Retirement Income Security Act’s (ERISA’s) notice provision, Section 204(h). But, the court found a Statement of Individual Benefits that Hakim received in 2000 clearly informed him that his promotion terminated his participation in the plan. Page three of the document states: “Because of your current employment classification, you are ineligible to participate in the Retirement Plan.”

The court noted this language is not highly technical, nor is it buried deep in a document. “It is difficult to imagine a more effective means of providing notice that an employee is no longer eligible to participate in Accenture’s retirement plan,” the 7th Circuit said in its opinion.  

Hakim contends that the release does not bar his claim because ERISA’s anti-alienation provision prohibits the release of ERISA claims through a general release. However, the court pointed out that it previously found in another case that pension entitlements are subject to the anti-alienation provision and cannot be alienated, but contested pension claims fall outside the realm of the provision and can be alienated. An entitlement refers to vested benefits to which a plaintiff is entitled under the terms of the pension plan itself, but a contested claim does not seek benefits to which the plaintiff believes he is entitled under the terms of the pension plan itself, but rather for additional benefits above and beyond the benefits to which he was entitled under the terms of the plan.  

According to the court, Hakim’s claim that he deserves more benefits than he accrued under the terms of the plan on the grounds that the plan administrator failed to provide adequate notice of a reduction in benefits could have been resolved before Hakim signed a release of those claims. The release “released the defendants from liability based on contestable pension claims. . . [it] did not wipe out [the plaintiff’s] claims to any pension benefits to which the plan entitled him.  

The opinion in Hakim v. Accenture United States Pension Plan is here.

 

«

 

You’ve reached your free article limit.

  You’re out of free articles!! 

Subscribe to a free PW newsletter - get free online access!

 Don’t leave before subscribing! 

 SUBSCRIBE & GET FREE ACCESS! 

If you’re a subscriber, please login.