Compliance October 27, 2005

Court Slaps Employer with $100 Daily Fine over Document Production

October 27, 2005 (PLANSPONSOR.com) - A federal judge has ruled that a pension plan administrator has to pay a $100 daily fine for not giving a participant requested information about his benefits.
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US Judge Michael Baylson of the US District Court for the Eastern District of Pennsylvania ordered Rohm and Haas Co. to pay to participant Gerald Kollman $9,800 in statutory penalties under the Employee Retirement Income Security Act (ERISA). Baylson imposed the fine because of what he said was Rohm and Haas’s 98-day delay in providing Kollman with information about the calculation of his benefits.

Baylson rejected Rohm and Haas’s contention that Kollman never made specific, identifiable requests for certain documents and that, in the absence of specific requests, it was not obligated to provide him with the material. Instead, the court sided with the holdings of other federal courts that a written request for information is adequate if it gives “clear notice” to the administrator of the types of documents requested.

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However Baylson sided with the company when he rejected Kollman’s contention that Rohm and Haas should pay statutory penalties under ERISA for Rohm and Haas’ breach of its fiduciary duties. 

According to case background from the court, Kollman participated in the Rohm and Haas pension plan. Hewitt Associates, which provided administrative services to the plan maintained a Web site that allowed Rohm and Haas employees to view calculations of their pension benefits.

The court said that in October 2000, Kollman checked the Web site to get a statement of his benefits in anticipation of early retirement. The Web site showed Kollman would receive a $522,043 lump-sum payment if he retired early. The Web site also indicated this amount was adjusted pursuant to a qualified domestic relations order that required Kollman to pay part of his benefits to his ex-wife.

After Kollman retired, Hewitt contacted him to inform him that he was entitled only to a $419,918 lump-sum distribution because the projected $522,043 did not include a subtraction of his ex-wife’s benefits. After learning of this, Kollman e-mailed Rohm and Haas’ human resources department alleging he had relied on the $522,043 calculation when he decided to retire early.

Through a series of e-mails and other correspondence, Kollman requested in February 2003 that Rohm and Haas provide him with numerous items, such as tape recordings of his telephone conversations with Hewitt and computerized notes relating to Kollman’s calls and use of Hewitt’s Web site.

According to the court, Rohm and Haas failed to respond to the request and in May 2003, Kollman filed a lawsuit against Rohm and Haas and Hewitt charging both with several violations of ERISA as well as several state law claims. The requested documents were produced after the lawsuit was filed, according to the court.

Baylson’s ruling is  here .

Compliance October 26, 2005

Boehner Committee Approves PBGC Funding Measure

October 26, 2005 (PLANSPONSOR.com) - A measure approved Wednesday by a US House committee would bump up pension insurance costs by $11 per person next year in a separate move from ongoing pension reform efforts.
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Under the bill approved by the House Education and Workforce Committee, the yearly charge for having private-sector pensions insured   by the Pension Benefit Guaranty Corporation (PBGC) would go from the current $19 to $30 in 2006, according to an Associated Press report. After that, the bill gives the agency the right to seek annual premium increases of up to 20% for the next four years. Congress, however, could disapprove any increase.

The proposed increase would pump $6.2 billion over the next five years into the agency’s coffers; it currently labors under a $23 billion shortfall.

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The committee approved the measure as part of package for cutting federal budget deficits by $35 billion over the next five years. It also would charge companies that have gone through bankruptcy and terminated their pension plans $3,750 for each participant in the plan.

The Senate Health, Education, Labor and Pensions Committee passed its own version of the plan last week that would raise the PBGC premium to $46.75. The Senate version, however, does not include the option to enact future premium increases of up to 20% annually.

Both the House and Senate also are working on comprehensive pension reform bills that, in addition to raising the premium, would tighten funding rules to guarantee that employees get benefits promised them when they retire. Both of those bills also include a premium boost to $30.

US Representative John Boehner,(R-Ohio), chairman of the House Education and Workforce Committee said that while his amendment will provide the PBGC with short-term help, any “comprehensive reform” passed this year will take precedence over this measure.

“The health of our nation’s worker pension system is a bottom line concern for American   taxpayers,” Boehner said in a statement. “While today’s vote to   strengthen PBGC funding is an important reflection of that fact, it is far more critical that we enact a comprehensive measure to overhaul our antiquated pension laws on behalf of workers, retirees, and taxpayers.”

Representative George Miller (D-California), the House panel’s senior Democrat, said he reluctantly supported the proposal but added that the “increases will serve no purpose” without it.

  

More information about the pension reform debate held by Boehner’s committee is  here .

More information about the Bush Administration’s pension proposal is here .

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