Summit Insurance

Independent insurance consultant Maryland

  • Email
  • Facebook
  • LinkedIn
Apply for
Healthcare Plan
Employee
Navigator Login
  • Company
  • Employee Benefits
  • Business Insurance
  • Personal Insurance
  • Reviews
  • Information
  • Contact

ERISA penalties are a reality. ERISA penalizes plan administrators for not providing plan documents

July 11, 2014 by Staff

erisa-penaltiesImportant reminder; Employee Retirement Income Security Act of 1974 (ERISA) (Pub.L. 93–406, 88 Stat. 829, enacted September 2, 1974, codified in part at 29 U.S.C. ch. 18) is a federal law that establishes minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries by:

  • Requiring the disclosure of financial and other information concerning the plan to beneficiaries;
  • Establishing standards of conduct for plan fiduciaries;
  • Providing for appropriate remedies and access to the federal courts.

ERISA is sometimes used to refer to the full body of laws regulating employee benefit plans, which are found mainly in the Internal Revenue Code and ERISA itself.
Responsibility for the interpretation and enforcement of ERISA is divided among the Department of Labor, the Department of the Treasury (particularly the Internal Revenue Service), and the Pension Benefit Guaranty Corporation.

ERISA requires that plan participants get copies of summary plan descriptions, plan documents and annual reports when requested. ERISA Section 104(b)(4) provides that “the administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract or other instruments under which the plan is established or operated.” There is even an enforcement provision that subjects the administrator to penalties if they fail to provide requested documentation. ERISA Section 502(c)(1) establishes that an administrator who fails to respond to a participant’s request for certain plan materials within 30 days could be subject to penalties of up to $110 per day for each day past the 30-day response time if the documents are not provided.

For administrators, this obligation can even apply if the participant is not specific in their request for documentation. Such was the case in Cultrona v. Nationwide Life Insurance Company, a recent event out of the Sixth Circuit Court of Appeals. Cultrona filed suit against Nationwide Life Insurance Company after an accidental death claim for her late husband was denied. During the appeal process, her counsel wrote a letter to the plan administrator requesting “all documents comprising the administrative record and/or supporting Nationwide’s decision.” Oddly, the administrator did not provide a copy of the actual accidental death policy for almost seven months.

The district court awarded $8,910 in statutory penalties to Cultrona because of the delay ($55 a day) and the administrator appealed. The administrator argued that the penalty was not warranted because she did not specifically request the document. It claimed that “clear-notice” should be applied, requiring participants to provide clear notice to the plan administrator of the information or documentation they desired. While the court agreed with the administrator that “clear-notice” was the standard to apply, it found that the administrator should have known from the request that they were being asked for a copy of the policy. Since it was clear that the policy would have to have been part of the review, it was clear it was being requested. From there, the court upheld the penalties.

For plan administrators, clear notice can be a tricky standard to try to sort out. Plan administrators should consider that ERISA clearly favors the production of documents when requested and recognize that a poorly worded request could still be enough of a request to warrant penalties. A simple solution is for administrators to avoid being accused of hiding plan documents. When responding to a request, give them what they ask for, and maybe even more (like what is required under 104(b)(4)). And if you have questions about how to respond to a request for documentation, ask for guidance from your professionals. That’s what we are here for.

Share this story

FacebooktwitterlinkedinFacebooktwitterlinkedin

Filed Under: Uncategorized

Company Profile

At Summit Insurance, we partner with our clients to offer all available benefit options.  We believe that every business owner, employee, and family is deserving of the benefits that a well-planned insurance program provides: safety, securing and peace of … Read More

Insurance News

  • February HR Newsletter
  • January HR Newsletter
  • September HR Newsletter
  • August HR Newsletter
Read More

Contact Us

Summit Insurance
11350 McCormick Road
Executive Plaza III, Suite 501
Hunt Valley, MD 21031
 
Phone: 410-584-9600
Fax: 410-584-8388

Copyright © 2023 SUMMIT INSURANCE

To visit our affiliate, click here:

Copyright © 2023 · Enterprise Pro Theme on Genesis Framework · WordPress · Log in