Remember: Fiduciaries Can Be Sued For Misrepresentations

Plan administration is a tricky thing. There is a long history of court cases arising from claims for misrepresentation, but ERISA has generally been found to protect simple state aw claims for negligent misrepresentation. However, a misrepresentation can give rise to a claim for breach of fiduciary duty. Take the case of Stark v. Mars, where the S.D. of Ohio recently ruled that a claim for breach of fiduciary duty for misrepresentation could proceed against the benefits committee. Stark utilized the company website to confirm her retirement benefit of about $5,300 a month. She also called a company employee and was again told that her monthly benefit would be $5,300. After she made here election, she was informed that there was an error in the calculation and her true monthly benefit would be $2,300 a month and she had to pay back an overpayment of $15,000. Naturally she brought a lawsuit. The Court first found that the complaint failed to establish that the company was a fiduciary. But it did find that the benefit committee was a fiduciary and was therefore subject to a claim for breach of fiduciary duty. To the extent the committee was responsible for plan administration, including giving advice to participants about their benefits, that would be sufficient discretionary authority to sustain a claim for breach of fiduciary duty. Since the case was only at the motion to dismiss stage, the Court did not rule on whether Stark would recover, only that she could proceed with her claim. Now it is very likely that the members of the benefits committee individually did not have contact with Stark. But they had a duty to make sure benefit information was communicated properly. So I think this case serves as a reminder to fiduciaries that one of their duties is to ensure that the plan, service providers and other plan representatives communicate accurate information to participants. Participants are allowed to rely on representations made by the plan. If your communication are not accurate (such as miscalculated benefit statements, incorrect eligibility language or missing disclaimers on notices), the participant may not necessarily get the benefit from the plan. But they can pursue a claim for breach of duty against the fiduciaries. So make sure you are providing accurate statements. And make sure you have your benefits professionals review communications on a regular basis to confirm they are accurate and correct under the current state of the law. It will go a long way toward avoid claims for breach of fiduciary duty based on misrepresentations.

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