The case Roche v. TECO Energy, Inc., No. 8:23-CV-1571-CEH-CPT, 2024 WL 3966067 (M.D. Fla. Aug. 28, 2024) portrayed ERISA yet again as one of the most “snakey” statutes.  Mr. Roche had worked for years at a power company and was counting on his pension for retirement. He read his summary plan description (SPD) and set in motion his plan to retire. On September 22, 2022, he submitted his application so he could retire in December. He was going to take a lump sum.

The pension administrator then informed him that the amount would depend on when the pension lump sum was paid to him. A payment in January as opposed to December could change the amount by $86,000. Then Mr. Roche learned he could not retire December 1, because that was within 90 days of his application. So, he had to take his retirement money January 1, 2023, with an $86,000 loss in his lump sum. 

Mr. Roche wanted to know how this could be. He read his SPD. It said nothing about lump sum calculations varying by so much. He learned that what the plan administrator did was use an IRS interest rate and mortality table. The SPD did reference an Internal Revenue Code section with a table, but that section did not contain the interest rate and mortality table. Rather, it referred to another code section and that other code section directed the Department of Treasury to publish a table periodically.  This table was not exactly easy to find for a layperson reading his SPD. A bit snakey if you ask me.

Mr. Roche learned that the plan administrator looked back at interest rates the August before the year he retired. That meant that retirement in 2022 required looking back to the interest rates in August 2021. And of course, retirement in January 2023 meant looking back to the interest rates in August 2022. A change in rates meant a change in the lump sum.

Losing that much money over just one month, and after working so many years, really aggravated Mr. Roche. He felt that the SPD should have informed him and others as to how pension benefits were calculated. That amount, $86,000, was material to him and should be to most working people. ERISA sections 102 and 404 both require disclosure of material information in the SPD. So why was this calculation not in the SPD?  How could the plan administrator expect him to figure all of this out? Does a pensioner have to hire an accountant or a tax lawyer to know whether the plan administrator is correctly calculating his pension benefit?  It should not be so hard on the working person.

Mr. Roche, after exhausting all claim procedures, filed a putative class action in federal court arguing that this failure to disclose material information violated ERISA.  Right away the power company filed a motion to dismiss. It argued ERISA does not require the SPD to include every little detail. The SPD is just a mere summary.  Further Department of Labor regulations do not require this kind of detail.

The court agreed, citing a Judge Posner opinion that "… the plan summary is not required to anticipate every possible idiosyncratic contingency …" Id. at 10 quoting Lorenzen v. Emps. Ret. Plan of the Sperry & Hutchinson Co., 896 F.2d 228, 236 (7th Cir. 1990). Mr. Roche's case was dismissed with prejudice, and he was stuck with his $86,000 loss of pension benefits.

So what can you do to avoid this snake? First, read your SPD, but then look for help. Plan administrators typically have a benefits department which they hold out as being helpful and willing to provide information to pensioners.  Pensioners in effect pay them to do that. However, under the law they only have an obligation to communicate information required by ERISA, so do not assume they are “taking care of you”. That obligation can be very limited, and they may fail to disclose what is critical for your concerns such as occurred in this case.  

However, if you ask questions, the plan administrator personnel do have an obligation to speak the truth, and not mislead. Of course, documenting exactly what was said is very important and that does not usually occur in a mere phone call unless you legally record it. It is better to make a request for information and further request that the response be provided in writing. For example, ask for each factor that impacts your benefit, whether the pension amount could change and what might cause a change, and what can be done to make sure there is no mistake? The more questions the better. You need to know where the snakes are hiding.