The US 2nd Circuit Court of Appeals affirmed the decision by a lower federal court in Leyda v AlliedSignal Inc, finding the company failed to comply with ERISA disclosure requirements when it distributed summary plan descriptions (SPD) to employees. The employees were attending meetings to discuss AlliedSignal’s benefit plans, according to Washington-based legal publisher BNA.

AlliedSignal was flagged for a violation in not ensuring each employee attended these meetings and received copies of the SPD.   Under ERISA provisions, these documents must be sent by a method “likely to result in full distribution” and that the plan administrator must take measures “reasonably calculated to ensure actual receipt” of the material by plan participants, the appeals court noted in its decision.

“The district court properly concluded that this regulation means that the plan administrator must make reasonable efforts to ensure each plan participant’s actual receipt of the plan documents,” Circuit Judge Amalya Kearse said in the decision.

However, the court did not take up the issue of whether awarding the employee’s wife damages in excess of the actual benefits she was to receive under the life insurance plan represented an error on the part of the district court.   The appeals court said it did not take on the issue because AlliedSignal had never raised the argument in district court.

Allied Signals Textron Deal

Charles Leyda worked for Textron Inc. from 1989 through 1994. As an employee of Textron, he participated in a group life insurance plan that provided coverage at a rate of three times his approximately $40,000 annual salary.

Textron was acquired by AlliedSignal in 1994, resulting in Leyda and 1,500 other Textron employees being retained by AlliedSignal. However, unlike Textron’s life insurance plan, AlliedSignal’s life insurance plan provided no-cost insurance coverage equal to only one and one-half times an employee’s salary.

To discuss the new and amended benefits at AlliedSignal, meetings were held for former Textron employees.    At these meetings, AlliedSignal distributed SPDs and mailed additional SPDs to employees on sick or extended leave. However, the company did not take attendance at these meetings to ensure that all 1,500 former Textron employees obtained copies of the SPD.

Leyda alleged he never received the new SPD form AlliedSignal.   He then enrolled in AlliedSignal’s life insurance plan and opted for coverage equal to his $40,000 salary, under the assumption that his coverage still amounted to three times his annual salary as it was with Textron’s plan.

District Damages

Leyda passed away in 1997, after which AlliedSignal sent his widow, Maureen Leyda, $40,000 from the company’s life insurance plan. However, Maureen contended that she was entitled to at least $120,000 in benefits. AlliedSignal denied the claim for additional benefits, and Maureen Leyda sued, saying the company violated ERISA by failing to give her husband a copy of the updated SPD.

The US District Court for the District of Connecticut agreed with Maureen Leyda awarding $62,250 in damages, representing the approximate difference between what she received under the AlliedSignal plan and what she would have received under Textron’s life insurance plan.