22 Jun

What Is The Remedy for An Insured Who Does Not Receive a Copy of Their Summary Plan Description for their Long Term Disability, Group Life or Health Insurance Benefits?

  1. What is a Summary Plan Description?

One of the most important documents participants are entitled to receive automatically when becoming a participant of an ERISA-covered retirement or health benefit plan or a beneficiary receiving benefits under such a plan, is a summary of the plan, called the summary plan description or SPD. The plan administrator is legally obligated to provide to participants, free of charge, the SPD. The summary plan description is an important document that tells participants what the plan provides and how it operates. It provides information on when an employee can begin to participate in the plan and how to file a claim for benefits. If a plan is changed, participants must be informed, either through a revised summary plan description, or in a separate document, called a summary of material modifications, which also must be given to participants free of charge. ERISA requires that plan administrators provide beneficiaries with a summary plan description setting forth the general terms of a benefits plan and a summary document providing notice of material modifications. 29 U.S.C. § 1024(b)(1)see also Curtiss Wright Corp. v. Schoonejongen, 514 U.S. 73, 83, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995).

2. Imposition of a Daily Penalty

Under 29 U.S.C. § 1132(c) an administrator’s failure to furnish the summary plan description can trigger a penalty since  § 1132(c) states that, “Any administrator … who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant … may in the court’s discretion be personally liable to such participant . The “administrator” of a plan is a defined term under ERISA :

(i) the person specifically so designated by the terms of the instrument under which the plan is operated;

(ii) if an administrator is not so designated, the plan sponsor; or

(iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, such other person as the Secretary may by regulation prescribe.

29 U.S.C. § 1132(c)(1) provides, in part, that any administrator …. who fails or refuses to comply with a request for any information which such administrator is required   by this subchapter to furnish to a participant or beneficiary … by mailing the material requested … within 30 days after such request may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day. Law v. Ernst & Young, 956 F.2d 364 (1st Cir. 1992).  In very limited circumstances, the First Circuit has also recognized “de facto plan administrators.” Under this theory, a court may hold a party liable under § 1132 as a de facto plan administrator if the party assumes control of the plan administrator’s function and presents itself as the plan administrator, even if that party is not specifically identified as the plan administrator. This narrow doctrine usually does not apply to insurance companies.

3. The Court Can Disregard the Terms of the Summary Plan Description If The Failure to Distribute Was Willful And Extraordinary Circumstances Are Present

The failure of a plan administrator to ensure timely receipt of the summary plan documents does not necessarily render those documents ineffective. Roarty v. Tyco Int’l Ltd. Grp. Bus. Travel Accident Ins. Plan, 386 F. App’x 329, 333 (3d Cir.2010). In order for a court to find that, because of a failure of distribution, a SPD can be found to be ineffective, there must be a showing of “extraordinary circumstances” in connection with the distribution failure.  Ackerman v. Warnaco, Inc., 55 F.3d 117, 124-125 (3d Cir.1995). Such circumstances may exist “where the employer has acted in bad faith, or has actively concealed a change in a benefit plan, and the covered employees have been substantially harmed by virtue of the employer’s actions.” Id. at 125; see also Jordan v. Federal Express Corp., 116 F.3d 1005, 1011 (3d Cir.1997). An example of extraordinary circumstances cab found in   Ackerman where the court found that the record supported an inference that the defendant actively concealed changes to a severance plan in order to prevent employees from leaving; the fact that meetings that were scheduled to inform the plaintiffs of the change in policy were never held;  the fact that the [a handbook noting the changes] was never distributed to the … employees, and the fact that a letter [from the defendant’s CEO] spoke of ‘changes’ in (rather than the elimination of) the severance plan.

Have you found yourself in the situation where you have not received a copy of your summary plan description for your insurance benefits? Contact an insurance claims attorney in Massachusetts at the Law Offices of George E. Thompson for consultation and assistance.