Illinois ERISA Lawyer Blog

Employees in the Chicago area who participate in an employer-sponsored 401(k) or profit sharing plan almost never have to ask any questions about how to make contributions to the plan. Upon commencing employment, the employer provides you with paperwork including election forms that will designate how much of your salary you wish to defer into the plan. Most of these types of retirement plans, though, provide that if you leave that particular employer, you can either leave the money in that plan, or request a distribution. The plans typically provide a procedure for requesting a distribution. It is not usually as simple as telling Human Resources you want your account balance out. There will typically be at least one form you must fill out to properly make the request under the terms of the plan. But the question arises: where do you get the form? The answer is that the employer must provide it to you, and a failure to do so could result in the employer's liability for breach of fiduciary duty. Such was the case in Kujanek v. Houston Poly Bag I Ltd., 658 F.3d 483 (5th Cir. Sept. 27, 2011).

Mr. Kujanek left his employer and communicated his intent to take a distribution from the plan. The employer would not distribute the funds, because a distribution required completing a request for distribution form, but the employer would not give Kujanek the form. He contacted the plan's third party administrator to request the form. The administrator contacted the employer, but the employer still would not provide the form. In the meantime, the securities in which Mr. Kujanek's account was invested significantly dropped in value.

The United States Court of Appeals for the Fifth Circuit held that the employer breached its fiduciary duty, and was liable to Kujanek for the difference between the account balance when Kujanek tried to request a distribution, and the time when the distribution finally took place. The employer had a fiduciary duty to provide Kujanek with the forms and tools necessary to properly make his request for distribution, especially when it knew he was trying to make such a request.

If you have experienced problems obtaining a distribution from your plan, speak with an experienced ERISA lawyer today.

Employees of Chicago companies who participate in a 401(k) holding employer stock or an Employee Stock Ownership Plan are often attracted to owning stock in their employer because of the significant upside for the staff doing a good job for the employer. You are there at work every day, and you see how the business operates. So you can see how your (and your colleagues') efforts will pay off. But holding employer stock in your retirement plan does not come without its risks. For example, one might say you have all your eggs in one basket. If your employer goes bankrupt, you not only are out of a job, but your retirement savings could be decimated. Fiduciaries of an ERISA retirement plan owe a duty of prudence with respect to the investments in the plan, and failing to take employer stock out of the retirement plan can be a breach of your employer's, or some individuals who make such decisions, fiduciary duties.

Many employer plans "hard wire" the holding of employer stock into the terms of the plan. This means the plan document states one of the purposes of the plan is to hold employer stock. In such cases, the fiduciaries are given a broader deference in their decision over when they should make the decision to stop including employer stock in the plan, a so called presumption in favor of the retention of employer stock being reasonable. The seminal case on that point is Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995). Recently, the Second Circuit Court of Appeals (a significant court that sits in New York City) adopted that rule in Gearren v. McGraw-Hill Cos., 660 F.3d 605 (2d Cir. Oct. 19, 2011). Plaintiffs in that case alleged it was a breach of fiduciary duty for fiduciaries of the McGraw-Hill 401(k) plan to not remove employer stock from the plan when the stock dropped 64% in value following the subprime mortgage crisis. The Second Circuit held that this presumption applies at the pleading stage, meaning it can cause a case to be dismissed if the proper facts are not pled.

Where the plan is subject to the Moench presumption, a plaintiff will generally have to allege that the employer stock faced a dire situation that was foreseeable to the fiduciaries. This is, of course, pretty vague language, and what it means can only be discovered through the case-by-case examples. If you have questions about your retirement plan including your employer's stock, consult an ERISA lawyer.

More and more frequently, employees in Chicago on long term disability through an employer-sponsored disability plan are facing benefit terminations for conditions such as Fibromyalgia and Chronic Fatigue Syndrome because of a so called "self reported symptoms" limitation in the long term disability policy. Insurers more frequently place these limiting clauses in disability policies, assuming they would dispose of all the Fibromyalgia and Chronic Fatigue Syndrome cases within 24 months. But not so fast. After withdrawing its opinion in Weitzenkamp v. Unum Life Insurance Co. of America, the Seventh Circuit Court of Appeals reissued an opinion, again ruling in favor of the claimant, but on different grounds. 2011 U.S. App. LEXIS 19283, 2011 WL 4375637 (7th Cir. Sept. 20, 2011).

I previously covered this opinion, and he suspicion for why the court may have withdrawn its opinion. This time, the Seventh Circuit held that although the limitation on self reported symptoms was a part of the plan, it did not apply in Weitzenkamp's case. The limitation in this policy could be construed one of two ways. Either a limitation that limit applicable to all disabilities where the disabling conditions are self-reported symptoms, as UNUM proposed, or as a limit on disabilities where the diagnosis of the condition is based primarily on self reporting of symptoms. The Seventh Circuit held that the latter construction was more reasonable. With every condition, it is not the condition itself that disables the person, but the pain, weakness, etc. associated therewith that renders the person disabled. To construe the limitation as UNUM suggested would literally cause every disabled person to have his or her benefits limited to 24 months pursuant to one of these clauses. Because in Weitzenkamp's case, the physicians had considered plenty of other data along with the self reported symptoms, the court held the limitation did not apply.

The lesson to be learned from Weitzenkamp is to make sure a doctor treating you for Fibromyalgia or Chronic Fatigue Syndrome runs appropriate tests to rule out other possibilities before diagnosing your condition. If the doctor does so, and your plan has a clause like the one in Weitzenkamp, you may be able to avoid application of such a limitation. If you have questions about a self-reported symptoms limitation, speak with a knowledgeable ERISA attorney.

Employees in the Chicago area, and elsewhere, come to expect that when their employer sponsors a pension plan, or other type of benefit plan, and promises a benefit, that the employer will honor that promise. That is, unfortunately, not always the case. The first question, though, is what to do about it when the employer, which is usually acting as the plan's administrator, clearly says it will not pay the benefit? The natural inclination is to want to file a lawsuit, and many people have done that immediately, only to be disappointed by having wasted so much time by failing to exhaust administrative remedies. But why should a claimant have to make an administrative claim to the plan when the employer unequivocally states it will not pay a benefit? The Eight Circuit Court of Appeals analyzed this very issue in Angevine v. Anheuser-Busch Companies Pension Plan, 646 F.3d 1034 (8th Cir. 2011).

In Angevine, Anheuser-Busch was the pension plan sponsor and administrator. The plan provided that if the company were sold or there was otherwise a change in control, participants would get an enhanced pension benefit, a 5+5 benefit (i.e., five years of age and service added to the employee's current count). When InBev bought out Anheuser-Busch, the company sent an email out to many employees, including Mr. Angevine, unequivocally stating the enhanced 5+5 benefit would not be paid. Mr. Angevine wished to take early retirement, but rather than making a claim to the plan for the enhanced benefit, he immediately sued in court, arguing he did not need to exhaust any administrative remedies because the plan repudiated its obligation to pay the enhanced benefit.

The Court of Appeals held that Mr. Angevine prematurely filed a lawsuit and was obligated to pursue administrative remedies--filing a claim with the plan, and exhausting any appeals with the plan. There are only two exceptions to the requirement to exhaust administrative remedies: when doing so would be futile, and when there is no administrative remedy to pursue. The plan stated that the way to pursue an administrative remedy is to file a claim for benefits with the plan. Also, the Court held the administrative remedy would not necessarily be futile because although the email provided the participants with an indication of what the plan administrator would do, it was not certain the plan administrator would deny the claims. The repudiation, while causing the claim to accrue and triggering any statutes of limitations, therefore did not provide a third exception to the requirement to exhaust administrative remedies.

If your retirement plan has indicated to you that it will not pay a benefit to which you think you are entitled under the terms of the plan, consult an experienced ERISA lawyer to determine the proper method to handle the claim.

Employees of Chicago area employers that participate in an employer sponsored group health insurance plan often assume if and when their claim is denied, they must sue the insurance company. But that is not always the case in litigation under the Employee Retirement Income Security Act of 1974 ("ERISA"). The insurance company is undoubtedly the party with whom the employee or other covered participant has had communications, and received a denial letter from. But the inquiry does not stop there.

In the case of a health insurance plan that is fully insured, meaning the insurance company bears the financial risk, then the insurer will undoubtedly be a fiduciary under the plan. But in the case of large employers, the plan is often self-funded, and the insurance company merely acts as a claims administrator. The question then is whether the insurance company exercised any discretionary authority or control over approving or denying the claim. See ERISA § 3(21)(A).

In Wesson v. Jane Phillips Medical Center & Affiliates Employee Group Healthcare Plan, No. 09-561 (N.D. Okla. Sept. 30, 2011), this issue arose. The plaintiff named BMI-Healthplans, the insurance company acting as a claims administrator, as a defendant. According to the plan document, BMI was merely a "plan supervisor" and would process claims and apply the rules of the plan to claims, but would not have any discretion. If this were true, BMI would be a non-fiduciary third party administrator not subject to liability in a claim for benefits due under the terms of the plan. However, the plaintiff alleged that BMI, despite not being contractually obligated to do so, actually did exercise discretionary authority or control, thereby making BMI a "functional" or "de facto" fiduciary. This just means that if a party does the acts the ERISA statute says makes one a fiduciary, that party is a fiduciary regardless of what any contract says to the contrary.

Despite the allegation, nothing in the administrative record revealed that BMI in fact did anything to make it a functional fiduciary, so the court dismissed all claims against BMI (but not the plan). If you have questions about an ERISA lawsuit, speak to an ERISA lawyer today.