In Dean v. Nat’l Prod. Workers Union Severance Tr. Plan, No. 21-1872, __F.4th__, 2022 WL 3355075 (7th Cir. Aug. 15, 2022), Plaintiffs are employees of Parsec, Inc. who sued the National Production Workers Union’s (“NPWU”) Severance Trust Plan, its 401(k) Retirement Plan, and other defendants for various alleged violations of ERISA. The district court dismissed the lawsuit and the Seventh Circuit affirmed in part and vacated in part the district court’s decision and remanded for further proceedings.
In 2017, Parsec employees voted to decertify the NPWU and elect Teamsters Local 179 as their new bargaining representative. The employees’ NPWU retirement plan accounts became inactive but remained under the plan’s control. The Plans denied Plaintiffs’ requests to roll over their accounts to the Teamsters’ plan. Plaintiffs alleged under ERISA § 502(a)(1)(B) and § 502(a)(3) that the Plans should have rolled over the assets in their accounts. The Seventh Circuit affirmed that Plaintiffs cannot pursue a claim under ERISA § 502(a)(1)(B) for a rollover of their accounts in the Severance Plan because under the terms of the Plan they did not qualify for a distribution: no severance occurred, they did not die, and they were not at least 65 years old. The court agreed that Plaintiffs could pursue rollover as an equitable remedy under ERISA § 502(a)(3) as an alternative claim but that claim fails because there was no violation of ERISA or the terms of the Plan. Similarly, Plaintiffs are not entitled to rollover their 401(k) plan accounts under the automatic-termination provision because the underlying trust was not terminated by the trustees. The automatic-termination section does not provide a basis for a right to roll over assets.
The court also found that the trustees and the plan administrator did not violate their ERISA fiduciary duties by not amending the Plans to allow rollovers. Amendments to plans are not actionable under ERISA’s fiduciary obligations. The court rejected Plaintiffs’ alternative theory that ERISA § 4235 requires a plan to transfer assets when an employer withdraws as a result of a change in the bargaining representative. This provision does not apply to defined-contribution plans.
Plaintiffs also alleged that the trustees and plan administrator breached their fiduciary duties by paying excessive fees and salaries, and by failing to disclose conflicts of interest regarding NPWU. The court sustained the dismissal of the excessive fees claim because Plaintiffs’ reliance on an “administrative expense ratio” did not provide any insight about how high the administrative fees are when compared to other plans. The court found that the trustees did not engage in impermissible transactions with parties-in-interest when they paid their relatives and NPWU employees who were trustees and officers of the Plans. However, the court vacated the dismissal of Plaintiffs’ claim that the Severance Plan paid unreasonable salaries to trustee Vincent Senese and plan administrator James Meltreger. Plaintiffs alleged that they were each given a $20,000 raise which was excessive given the limited function of the Severance Plan. Defendants’ justification for the raise is an affirmative defense, which cannot defeat a claim at the motion to dismiss stage.
Lastly, Plaintiffs brought a claim under ERISA § 502(c)(1)(B) against the plan administrator for failing to respond to their requests for information. With respect to information supporting Defendants’ refusal to roll over plan assets, including a written denial letter in response to Plaintiffs’ claim letter, the court explained that penalties are not available for violations of an agency regulation, in this case, ERISA § 503’s requirement that plans provide participants or beneficiaries with written denials. 20 U.S.C. § 1133(1). The court did find that Plaintiffs sufficiently allege a claim for Defendants’ failure to timely produce the 2018 annual pension benefit statements as required by ERISA § 105, the Severance Plan’s settlement agreement with the Department of Labor since it governs the plan’s structure and organization, and the 401(k) plan’s summary plan description even though it does not exist. The court also found that the 12-day delay in producing the documents is not necessarily de minimis and that Plaintiffs have alleged enough to plausibly state a claim that disclosure was untimely.
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