A recent federal district court case, which imposed $74,140 in penalties on a plan administrator for failing to provide the plaintiff with the plan documents she requested, is a reminder that plan administrators may be exposed to liability for not providing documents even though a claimant may have no entitlement to benefits under the plan.

ERISA Penalty for Failing to Provide Documents Timely. Section 502(c) of the Employee Retirement Income Security Act of 1974 (“ERISA”) allows courts to impose a penalty of up to $110 per day on a plan administrator that fails to provide certain plan-related information to a participant or beneficiary within 30 days after receiving a written request for the information. The penalty, which is in the court’s discretion, is payable to the participant or beneficiary. The right to sue to recover the penalty is independent of any claim for benefits.

The Facts in the Case. In Harris-Frye v. United of Omaha Life Insurance Company, the plaintiff, who was a claimant/beneficiary under a life insurance policy obtained through a welfare benefit plan, sued the plan and the insurance company to obtain benefits under the plan and for breach of fiduciary duty. The plaintiff initially requested documents related to plan benefits in December 2012. After not receiving the requested documents, the plaintiff submitted additional requests for the documents.

Subsequently, the plan administrator provided the plaintiff with a copy of the SPD for the plan, and the insurance company provided the plaintiff with a copy of the insurance policy. In a letter received by the plan administrator in May 2013, the plaintiff indicated that she obtained a copy of the insurance policy from the insurance company and requested plan documents related to the plan’s “Rules of Eligibility.” The plan administrator ultimately provided the plan document to the plaintiff in December 2014.

The Court’s Decision. The court did not rule on the plaintiff’s claim for benefits and rejected her breach of fiduciary duties claim. However, the court awarded the plaintiff a total of $74,140 ($12,760 for the insurance policy and $61,380 for the plan document) in statutory penalties because the plan administrator failed to timely provide the plaintiff with the documents she requested. The court imposed the maximum penalty of $110 per day (for 674 days) to punish the plan administrator for failing to respond to the plaintiff’s requests. The court specifically rejected the plan administrator’s arguments that:

• The plan document was unnecessary because the SPD contained all of the relevant terms;
• The penalty should not apply because the plaintiff was not prejudiced by the plan’s failure to provide the documents;
• The penalty should not apply because the plan administrator acted in good faith; and
• The penalty for not providing the insurance policy should have stopped accruing when the plaintiff obtained a copy of the policy from the insurance company.

The court emphasized that the purpose of the penalty was to induce plan administrators to provide requested documents by punishing them for failing to do so, not to compensate beneficiaries for their lack of access to the documents.

Take Aways. This case serves as a reminder for plan administrators to timely and completely respond to a participant’s or beneficiary’s request for information. This case shows that a court will not hesitate to impose the maximum penalty as a punishment for failing to provide requested documents, even if (i) the claimant is not harmed by the delay, and (ii) the claimant obtains the documents from another source.

Next Steps. To avoid penalties, plan administrator should have processes in place to:

• Recognize when a communication with an individual constitutes a written request subject to the 30-day delivery requirement; and
• Identify which requested documents should be provided. As such, it may be helpful for a plan administrator to consult with legal counsel when uncertain about how to respond to a particular request.

Contact Information. For more information please contact Don Mazursky (404.888.8840), Randall Constantine (404.888.8877), David Putnal (404.888.8836), Toby Walls (404.888.8870) or Teri King (404.888.8847).