Consultant Off the Hook for Providing Wrong Benefit Estimate

The 10th U.S. Circuit Court of Appeals has affirmed a district court’s dismissal of claims a pension plan’s consultant violated the Employee Retirement Income Security Act (ERISA) when she conveyed an incorrect monthly benefit amount to a participant planning to retire.

Although the consultant is not named as a defendant in the suit, Trent Lebahn and his wife Wendy argue that she was a fiduciary of the plan, rendering the National Farmers Union Uniformed Pension Plan and other named defendants liable for her breach of fiduciary duty.

The appellate court agreed with the district court that the consultant had not acted as an ERISA fiduciary when calculating pension benefits. It noted that under ERISA, “[A] person is a fiduciary with respect to a plan to the extent . . . he has any discretionary authority or discretionary responsibility in the administration of such plan.” The court cited the Oxford American Dictionary’s definition of discretion—“the freedom to decide what should be done in a particular situation”—in finding that conducting a routine computation, as required by one’s job, does not inherently require discretion.

The appellate court also noted that in an Interpretive Bulletin, the Department of Labor (DOL) said a person who performs purely ministerial functions such as the “calculation of benefits” and “[p]rocessing of claims”] for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons is not a fiduciary because such a person does not have discretionary authority or discretionary control with respect to management of the plan or assets of the plan and does not render investment advice.

According to the court opinion, similarly, in another interpretive bulletin, the DOL interpreted the functional-fiduciary provision of ERISA to exclude from fiduciary status persons who provide legal, accounting, actuarial, or consulting services but lack discretionary authority and do not offer investment advice to the plan.

Hoping to retire, Lebahn contacted a consultant hired by his company’s pension plan to ask what his monthly pension payment would be. She told Lebahn that if he retired soon, he would be entitled to $8,444.18 per month. At Lebahn’s request, she checked her calculations and assured Lebahn that the figure she had quoted was correct.

Shortly after Lebahn retired, a representative of the pension plan contacted him and told him he was being overpaid by almost $5,000 per month. A pension-plan attorney then told Lebahn that he would need to return over $43,000 in overpayments he had already received. Unable to retire on his true pension benefit of $3,653.78 per month, he tried to go back to work, but was unable to find a suitable job.

Lebahn and his wife then sued under ERISA, alleging that in incorrectly representing Lebahn’s benefits and failing to pay him in accordance with those representations, the pension plan, the pension committee, and “National Farmers Union Pension Consultants” incurred ERISA liability under theories of breach of fiduciary duty and equitable estoppel.

The appellate court ruled the Lebahns’ claim of equitable estoppel was also properly dismissed. In dismissing this claim, the district court reasoned that the Lebahns had failed to plead facts satisfying two of the five elements of equitable estoppel: awareness of the true facts and justifiable reliance. On appeal, the Lebahns did not challenge the district court’s conclusion that they failed to adequately plead justifiable reliance, so the appellate court affirmed the dismissal of the equitable estoppel claim.