Neil Bergt was president and chairman of the board of directors for the airline MarkAir. He participated in the company-sponsored profit-sharing plan and an employee stock ownership plan. The company then created an ERISA retirement plan that allowed employees who were pilots or former pilots to participate.
However, the new retirement plan excluded employees participating in any other IRS-qualified pension, profit-sharing or retirement plan to which the employer contractually had to contribute. MarkAir also issued a summary plan document (SPD) that prohibited participation in this ERISA retirement plan by employees who were in a company-sponsored retirement or profit-sharing plan.
Ex-Pilot Denied Retirement Benefits
Bergt, who was also a former MarkAir pilot, filed a claim for benefits under the ERISA retirement plan. The benefits committee denied his request because he already participated in MarkAir’s profit-sharing plan and therefore was ineligible.
On Bergt’s request, the committee reconsidered, noting that it was unclear whether the phrase in the master ERISA retirement plan document stating, “to which the Company was contractually required to contribute,” only referred to retirement plans or also to pension and profit-sharing plans. However, because the broader SPD language excluded anyone who participated in a company-sponsored retirement plan, the committee determined that Bergt was ineligible.
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Employee Fights Decision
Bergt took MarkAir to court. He argued that the master plan wasn’t ambiguous and only excluded participants in pension or profit-sharing plans to which the company was contractually required to contribute. And, he claimed, the profit-sharing plan to which he belonged didn’t contractually require the company to contribute. MarkAir countered that the master plan document was indeed ambiguous, and therefore the unambiguous SPD should control.
Deciding Which Document Prevails
The federal Ninth Circuit Court of Appeals, which covers California, explained that the SPD is a plan document and should be considered along with the master plan document when interpreting an ERISA plan. However, when the two documents conflict, the terms of the master plan control if they are more favorable to the employee. That’s because the master plan document is the main document that specifies the plan’s terms, and employees are entitled to rely on its unambiguous provisions. The SPD, on the other hand, should simply summarize relevant portions of the master plan document.
In this case, the court said that the terms of the two documents clearly conflicted. And the court concluded that the master plan document wasn’t ambiguous. In particular, it specifically excluded participation by an employee who was a member of a company profit-sharing plan only if the company was contractually required to contribute to that plan. And, said the court, the company had no contractual obligation to contribute to Bergt’s profit-sharing plan. Therefore, he was eligible for retirement benefits according to the master plan even though the SPD clearly disqualified him. Thus, the court ruled in Bergt’s favor.
Carefully Review Documents
This ruling illustrates that careful drafting of benefit plan documents is critical. And, even though the SPD should merely be a summary of key plan provisions, inconsistencies between the SPD and the master plan documents can lead to expensive disputes.