Compliance August 26, 2005

Employer Hit with $2,500 Fine for Plan Information Disclosure Delay

August 26, 2005 (PLANSPONSOR.com) - A federal judge has slapped a Puerto Rican company with a $2,500 fine for delaying its response to an employee's inquiry about the firm's long-term disability plan for 25 days after the 30-day response deadline.
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Chief US District Judge Jose Fuste of the US District Court for the District of Puerto Rico imposed the fine on Pharmacia under a section of the Employee Retirement Income Security Act (ERISA) that mandates that employers respond to workers’ information requests within 30 days, according to BNA.

At the same time, Fuste ruled that plaintiff Robur Otero-Carrasquillo was not entitled to separation pay plan benefits after the plant in which the employee worked closed, since under the terms of the plan, Otero-Carrasquillo had already been offered a comparable posting.

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According to the decision, Otero-Carrasquillo started at Pharmacia in 1973, and worked as a research associate in itsArecibo, Puerto Rico fermentation plant from the late 1980s. In February 2000, Pharmacia announced the closing of the plant, and in February 2001, all employees received a Spanish translation of the summary plan description (SPD) of Pharmacia’s separation plan package. According to the SPD, employees would be granted plan benefits if they did not receive a “comparable” position within the company.

Otero-Carrasquillo applied for a comparable position and was told in August 2001 that he would be assigned as a microbiologist. According to the court, Otero-Carrasquillo perceived this as a demotion, and in October 2001, resigned and applied for plan benefits.

However, because he had been offered another job, Pharmacia HR officials told Otero-Carrasquillo that he was no longer eligible for the benefits. After Otero-Carrasquillo’s last day of work in November 2001, he was hospitalized for several weeks. Otero-Carrasquillo received short-term disability benefits of 100% of his salary from December 2001 until May 2002, then began receiving long-term benefits equaling 60% of his salary.

Otero-Carrasquillo took the issue to court with a lawsuit charging an ERISA violation both for not providing the disability plan information on a timely basis and by not providing him the requested separation benefits. In his decision, Fuste ruled that the company had not violated ERISA by its separation benefit decision.

Dealing with the issue of whether Pharmacia had suggested a like job for him to move into, Fuste turned aside Otero-Carrasquillo’s contention that he was not offered a “comparable position” because the job suggested to him was not as prestigious as his original assignment. Fuste asserted that Otero-Carrasquillo clearly fit the qualifications of the position to which he was assigned, and that the employees assigned to the positions he wanted were as qualified, or more qualified, for those positions than Otero-Carrasquillo.

Fuste also decided that ERISA preempted Otero-Carrasquillo’s state law claims for negligent and intentional infliction of emotional distress and fraudulent inducement.   These claims clearly related to an ERISA plan because the court would have to determine Pharmacia’s disclosure duties as created by ERISA, the court said.

The case is Otero-Carrasquillo v. Pharmacia, D. P.R., No. 03-1651 (JAF), 8/15/05.

Benefits August 25, 2005

Report: Greater Employee Participation in Employer-Paid Benefits

August 25, 2005 (PLANSPONSOR.com) - In its National Compensation Survey on Employee Benefits in Private Industry in the US as of March 2005, the DoL's Bureau of Labor Statistics (BLS) points out that participation rates are higher for benefits that are paid for by the employer.
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The BLS survey found that nearly all employees with access to defined benefit pension plans, life insurance plans, and disability benefit plans participated in these employer-paid benefit plans. While 70% of workers had access to medical plans, only 53% participated. Fifty three percent of workers surveyed had access to a defined contribution plan, but only 42% participated.

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The BLS also found that participation in non-employer-paid benefits varied according to the employees’ earnings. Seventy six percent of white collar workers with access to medical benefit plans participated in those plans, while 61% of service workers participated in medical plans offered them. Similarly, 85% of workers earning $15 an hour or more participated in a defined contribution plan and 70% of those earning under $15 an hour participated in their defined contribution plan.

Other key findings in the BLS survey include:

  • 21% of employees participated in defined benefit retirement plans and 42% participated in defined contribution retirement plans.
  • Paid leave was the most commonly provided employee benefit in the private sector – 77% of employees were offered paid holidays and vacations, 69% were offered paid jury duty leave, and 48% were offered paid military leave.
  • 63% of private firms offered health insurance benefits and about 50% offered at least one type of retirement plan.
  • Employee contributions toward medical coverage averaged $273.03 per month for family plans and $68.96 per month for single coverage.
  • 52% of employees had access to life insurance plans and 49% participated.
  • Short-term and long-term disability benefits were offered to 40% and 30% of employees, respectively, and nearly all participated.

The complete report of survey results can be found here .

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