Even if those administering your plan are familiar with the ERISA notice and disclosure requirements, it’s worth remembering the importance of notification during the series of benefits transfers that can occur from corporate takeovers. Not doing so, even if the accrued benefits are shifted to the new company, can leave participants unaware — and possibly able to seek and receive double benefits.
A federal district court in Utah recently ruled that a plan sponsor failed to give the statutorily required notice of plan changes, which was an abuse of its discretionary authority to determine appropriate benefits as construed by the plan. An ERISA breach occurred when the employer did not grant benefits after lack of notice of the transfer of plan sponsor, the decision concluded.
Background
A case decided in late 2014 by a federal district court in Utah, Anderson v. Cemex Inc., No. 2:12-cv-00136-TC (D. Utah, Dec. 29, 2014), involved several transfers of pension benefits starting in 1984 when Martin Marietta Corp., leased a cement plant it owned in Leamington, Utah, to Southwestern Portland Cement Co. (now known as Cemex Inc.). The plaintiffs in the case were all employed by Southwestern at the plant from 1984 to 1989, and Southwestern set up a retirement plan for them. In March 1989, Southwestern and Martin Marietta agreed to terminate the plant lease and give the employees the option to become Martin Marietta employees. The agreement also dictated that Southwestern would transfer pension assets to Martin Marietta to cover employee pension accruals from 1984 to 1989, according to the court ruling.
The successor defendant company in this case, Cemex, did not notify the plaintiffs of this 1989 transfer, however. ERISA requires an administrator to notify plan participants of plan changes by providing summaries of amendments no later than 210 days after the end of the plan year in which the amendment is adopted.
Shortly after Martin Marietta terminated its lease with Southwestern, Martin Marietta sold the plant to Ash Grove Cement Co. The plaintiffs were terminated in May 1989 by Martin Marietta but rehired by Ash Grove. Martin Marietta did not transfer pension liability that previously had been transferred from Southwestern to Ash Grove. The company sent Notices of Vested Retirement Income to each plaintiff, confirming that each had been given full service credit for his or her years of employment with Southwestern.
The plaintiffs remained at the Ash Grove-run plant and had pensions from Martin Marietta that included their assets from time of service with Southwestern. Cemex later took over Southwestern, and eventually renamed the plan the Cemex Pension Plan.
In March 2010, one of the plaintiffs, Jeremy Skeem, requested pension benefit information from Cemex. Cemex contacted Martin Marietta (later doing business as Lockheed Martin), which confirmed it had responsibility for Skeem’s pension benefits. Cemex later gave a list of all former Southwestern employees to Martin Marietta, and Martin Marietta responded by indicating that it had pension benefits for several people on the list for the years 1984 to 1989. Later in 2010, through counsel, the other plaintiffs in the case submitted claims for pension benefits to Cemex.
Cemex obtained additional documents through discovery from Martin Marietta that showed that 14 of the 33 plaintiffs have received or are receiving benefits from the Martin Marietta plan or a successor plan, and those include their years of employment with Southwestern. The remaining 19 plaintiffs will be entitled to receive benefits from the Martin plan during the same time period.
After gathering that information, Cemex denied Skeem benefits in letter in May 2011, saying “Lockheed Martin has indicated that it assumed the liabilities for providing the [Southwestern Portland Cement Co.] participants a pension for the period 1984-1989.” Cemex cited no plan provisions that supported their denial.
To read the complete story on Thompson’s HR Compliance Expert blog, click here.