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The spouse of a deceased television station employee can proceed with breach-of-fiduciary-duty claims against his husband's former employer based on the employer's failure to inform the employee that he could elect a joint-and-survivor annuity under the company's pension plan, the U.S. District Court for the Northern District of California held.
Under the Employee Retirement Income Security Act of 1974 (ERISA), benefits available under a retirement, pension or other ERISA-governed benefit plan must be paid according to the terms of the plan. Individuals and entities, such as employers or investors, who control the plan's assets or use discretion in managing or administering the plan have a fiduciary responsibility to, among other obligations, act in the best interests of the plan beneficiaries.
In 2004, David Reed and Donald Gardner, a KRON-TV employee, were registered as domestic partners in California. In 2009, Gardner retired from KRON-TV, and the two met with KRON-TV's human resource department to discuss Gardner's benefit options under the employer's pension plan. Unmarried individuals could only receive a single-life annuity, which paid benefits at a higher rate but expired following the employee's death. Married employees could elect to receive a joint-and-survivor annuity that would continue to pay benefits to a surviving spouse after the employee's death or elect the single-life annuity with the written consent of his or her spouse.
[SHRM members-only HR Q&A: Domestic Partner Benefits: How does the Pension Protection Act benefit domestic partners?]
Reed and Gardner were not married when Gardner retired (the two later married in May 2014), but California law entitles registered domestic partners to the same legal rights, benefits and protections as married couples. In addition, the television station's benefit plan stated that it would be interpreted and administered in accordance with California law. Gardner, unaware of his eligibility to receive a joint-and-survivor annuity, elected the single-life annuity.
When Gardner passed away in June 2014, the pension plan stopped issuing annuity payments. After Reed's attorney contacted KRON-TV for information about the pension plan, the company responded that he was not eligible for survivor benefits under the plan. Reed submitted a claim for survivor benefits to the pension plan committee but did not receive a response.
Reed then sued the pension plan, pension plan committee and KRON-TV, claiming that:
Based on the breach-of-fiduciary-duty claim, Reed petitioned the court, among other remedies, to:
In response, KRON-TV argued that Reed's claims would be duplicative of his claim for plan benefits and that he had not alleged any fraud or mistake that justified changing the plan.
The district court denied KRON-TV's motion to dismiss Reed's claims for breach of fiduciary duty. Although KRON-TV correctly argued that plan beneficiaries cannot receive a double recovery based on claims for plan benefits and claims for breach of fiduciary duty, the court held that ERISA does not prevent plaintiffs from bringing these claims simultaneously and that it was too early to determine whether Reed's breach-of-fiduciary-duty claims duplicated his claim for benefits. Furthermore, Reed's assertion that KRON-TV did not inform Gardner of his right to elect a joint annuity was sufficient basis to assert his claim that the plan should be changed.
However, the court also held that KRON-TV could not be sued for failing to promptly provide Reed with plan documents because it was not a "plan administrator" and instead the pension plan committee would be liable for any statutory penalties.
Reed v. KRON/IBEW Local 45 Pension Plan, N.D. Cal., No. 16-cv-04471 (Dec. 5, 2016).
Professional Pointer: This case presents a vivid reminder that employers have a duty to inform employees about all potential benefits and options under their plans and that all staff members involved in administering the plans need to be familiar with new meanings that plans may acquire as a result of evolving legal standards.
Nick Bauer is an attorney with Collazo Florentino & Keil LLP, the Worklaw® Network member firm in New York City.
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