How Far Does a Pension Plan Have to Go to Persuade Participants to Make the Decisions that Are Right for Them Individually?

Today's (7/30/2008) Pension & Benefits Daily issue reports on the litigation following the sad death of Mr. Allen Anderson, a hard-working man who died of cancer, Anderson v. Board of Trustees of the Northwest Ohio United Food and Commercial Workers Union and Employers' Joint Pension Fund, N.D. Ohio, No. 3:07 CV 576, 7/28/08.

This is not the usual case of a participant's having been denied treatment or coverage by a hard-hearted insurance company. Rather, when Mr. Anderson's medical leave was about to expire and he asked about his options, the administrator of his pension and welfare plans suggested that he return to work briefly, to renew his entitlement to a limited period of free extended health coverage. He did that, and, as a result, was apparently able to continue receiving the medical care his doctors recommended. However, that meant he did not retire, so he did not elect a pension with a 10-year guaranteed payment feature. Since he was unmarried, no death benefits were payable from the pension plan when he died soon after returning to active-employment status, although life insurance benefits were paid through the welfare plan.

The court held that it was a fiduciary breach for the plan representatives to fail to discuss the option of retiring with a generous death benefit with Mr. Anderson, when he asked about his choices. (It was mentioned, but not discussed, because Mr. Anderson said he was determined to go back to work and beat his cancer.)

I can't figure out whether this is an important decision or an anomaly. As I read the facts, it looks as if this participant was treated with great compassion by the plan representatives, his union and his employer, and they turned themselves inside out to try to accommodate his needs. Yet the court says he was treated "with great iniquity"--maybe the iniquity was the cancer, not the treatment by the plan, but it's amazing that the publication services could read the opinion, drenched as it must have been in the judge's tears.

The court concludes that it was imprudent and a breach of fiduciary duty for the TPA to fail to counsel him to retire with the 10-year continuous and certain pension form, because that would have provided death benefits for his family (he lived with his mother). The judge says that it was ridiculous to believe Mr. Anderson’s repeated brave statements about continuing to work and conquering his cancer, since he was clearly terminally ill.

But, based on the facts recited in the opinion, the judge seems to have reached the wrong conclusion as a matter of fact. If Mr. Anderson had retired, his retiree health insurance would have been inadequate to cover his medical costs. The plan, the union and the employer conspired to prolong his active-participant status so he could keep the health coverage he needed. Mr. Allen made the RIGHT decision, based on their advice, and the court calls it a breach of fiduciary duty.

What am I missing? Would the court have understood it better if the case hadn’t gone on summary judgment? (From the opinion, it does not appear that the court was presented with a dollar comparison of the value of the health insurance to Mr. Anderson personally versus the value of the death benefit to his mother and brother.) Is this case a dramatic extension of the “duty to inform” line of opinions, or just the melodramatic conclusion to a sad end-of-life story?

Comments

[Ron Dean]

I think this passage at pages 3-4 of the district court's decision adds a different gloss to this case. If he wanted he could have bought COBRA to continue his health coverage (actually, the medical providers probably would have been happy to pay for the COBRA) and he also could have provided for his heirs -- a choice he wasn't allowed to make because he wasn't told of the 10 year certain.

"Allen contacted his union agent, Karen McHugh, who along with the Fund's NEBA liaison, Jan Palmison, informed Allen that he had three options: (1) Return to active status with Kroger for two weeks. After two weeks on active status, Anderson could take another leave of absence--with six more months of disability pay ($ 225 per week) and restart the clock for three additional months of free health insurance; (2) Retire and receive retiree health insurance. However, the coverage provided was not an attractive option to someone faced with expensive medical treatments on the horizon; or (3) Retire and continue his current health insurance for eighteen months by paying for it through COBRA, at a cost of $ 755 per month.

"Palmison did not inform Allen about another pension option, the Ten-Year Certain Option, beyond listing its name among other retirement options. Allen told Palmison that he had no intention of retiring, and that he wanted to win his battle with cancer and return to his job at Kroger. Palmison took this to mean [*4] Allen was focused on learning more about insurance options and not about retirement options, although Palmison did recognize that one of Allen's concerns was not leaving his parents with the burden of paying his medical bills. Palmison Depo. at 31-2, 36-8, 50-2, 64-7, 145, 164, 173, 237-8, 242-4, 310, 324, 339; McHugh Depo. 23-5, 34-5, 40, 43, 45, 50, 84. Finally, in October 2005, Allen wrote that he needed to return to work so that he could extend his health insurance another ninety days, given the high cost of COBRA. Anderson Depo., Ex. O at 2."

[Marc L]

Taft-Hartley Funds often have close relationships with their participants. Unions, employers and plans work together in terminal cases all the time. Yet decisions like this lead to the lawyerization of the Fund Office. Lay out all the options, offer no opinion or guidance on any, inundate the participant with paper. In litigation, you can point to all that, but it certainly isn't real participant service. In court, they try to make the Fund Office into a big bad insurance company, but it rarely anything like that.

[Jim G]

What are Plan Admin's responsibility? I don't think this case really spells it out because the court said that the "TPA to failed to counsel him to retire with the 10-year continuous and certain pension form". What does "Counsel" mean? Is it, "this is what you should do" or is it "here are your options". How much guidance is the TPA's responsiblity?

We had a similar situation recently. An employee who we pretty much thought was going to die decided to stay on LTD rather than retire. His wife did not push it so neither did we, although we DID provide all the informaiton. After he died, I had a hard time (and still do) thinking that if only we would have pushed her a little more to have him retire she could have been receiving a retirement benefit. Now she gets nothing from the retirement plan. Should I have been more forceful? Who am I to say "sorry, but your husband is going to die and this is the best thing for you"?

[Mark B.]

Just from the post, and without reading the case, it could be that the court was looking at fiduciary duties only in the context of the pension plan. This is hardly unusual, because ERISA fiduciary duties are plan specific and do not look at the totality of a participant's circumstances outside of the plan. For this reason, the DOL has concluded that decisions on voting employer stock in an ESOP in a proxy contest (or tendering in a tender offer) should not take be based on (perceived) job security. Here there are facts to show that the employee did not want to retire, and perhaps there was something in the SPD explaining death benefits that could also be useful on appeal. That said, this case substantiates the advice I give clients in these situations: Direct the participants to the SPD and tell them they have to make their own choices after seeing the distribution disclosure documents, because no good deed goes unpunished.

[Paula]

This may reinforce the old idea of "getting it in writing". Had the plan official given him only the printed material describing the different benefits and given the useless advice ("Consult your financial or tax advisor."), he would be completely blameless -- unless it happened to be decided by a different judge.

[Jim C.]

There is some information missing from the article, such as the amount of his pension benefit that he forfeited by returning to work.

It appears that the administrator was acting more as an advocate for the participant rather than as a source of unbiased information. Had the participant been advised of ALL his options, with the potential pros and cons, then the court may not have ruled as it did.

[Kim]

A classic case of "No good deed goes unpunished."

[ellen eklman]

Judy -- I'm with you and Frank Cummings -- I think this is another one of those incredibly irritating cases in which it is clear that the judge has absolutely no idea what actually went on . .

aarrggghh

[FRANK CUMMINGS]

Judy -

You're not missing a thing, except that this is an acrobatic performance where the court, with its head in the sand, simultaneously stands the statute on its head. Arrggghhhh!!

Frank C.