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Washington D.C. Benefits Law Blog

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D.C. residents who have corporate pensions should take note of a recent spate of lawsuits against companies who have allegedly breached their fiduciary duties by underpaying joint and survivor annuity benefits (JSA). Recently, there was a lawsuit filed against UPS which was the latest suit to claim that a company effectively shortchanged those who elected to take their pensions as a joint and survivor annuity as opposed to a single life annuity (SLA).

Retirees have the option to take their pension as a JSA so that their beneficiaries can continue to receive their pension after they die. A JSA is a lower amount than an SLA. Companies cannot simply choose any percentage that they want for a JSA. Instead, it must be the actuarial equivalent of an SLA.

ERISA lawsuit filed against Shell Oil and Fidelity

Many people in the District of Columbia have benefits plans through their jobs that are governed by the Employee Retirement Income Security Act. Workers might want to be aware of a lawsuit that has been filed against Shell Oil and Fidelity for alleged violations of ERISA.

According to the complaint, the plaintiffs allege that Shell Oil failed to exercise its bargaining power to secure lower asset management and record-keeping fees for the benefit of the plan participants. The plaintiffs also allege that Shell allowed Fidelity to use the confidential data of the plan participants, including their Social Security numbers and investment choices, to engage in aggressive marketing campaigns for Fidelity's other financial products outside of the 401(k) plan.

ERISA case settled by large defense contractor

A major defense contractor with employees in Washington, D.C., and across the country is settling a class action suit linked to its retirement plan. Members of Northrop Grumman's 401(k) plan brought a lawsuit under the Employee Retirement Income Security Act (ERISA), a law that protects employee benefits from misuse, mismanagement or violation of fiduciary duties. Members of the plan said that the participants' assets were placed at risk by management decisions, including charging excessive fees and overpaying for plan administration.

The case began in 2006 with allegations that Northrop Grumman's retirement plan was paying excessive fees, wasting employees' retirement funds. While this suit was settled for $16,750,000, it only addressed the issue of excessive charges prior to May 11, 2019. However, they brought a new lawsuit in 2016, saying that they continued to pay excessive fees and that their plan holdings were put at risk by the company's investment choices. However, by August 2019, the case continued with one remaining claim, that the defense contractor violated its duties to plan participants by choosing active management for one of its funds, which is more expensive than a passive management style. By 2014, the company had shifted to passive management for all of its 401(k) plans.

Lawsuit accuses Trader Joe's of mismanaging retirement fund

Workers in Washington, D.C., and across the country rely on their employee benefits, including their retirement programs, health insurance and disability insurance. This is one reason why the Employee Retirement Income Security Act, or ERISA, regulates these programs in order to protect employees from the consequences of wasteful, destructive or even fraudulent practices. In one case, popular supermarket chain Trader Joe's is facing a lawsuit over its retirement plan, specifically over the services and fees paid to an investment management company and accusations of poor choices for investment options for the plan.

The Trader Joe's defined contribution retirement plan holds at least $1.6 billion in funds for its employees. Capital Research serves as the plan's recordkeeper and investment manager. The company also works for American Funds, a mutual funds group. The lawsuit alleges that the fund management company has a conflict of interest because it receives fees based on the amount of money invested in the American Funds while also receiving record-keeping fees as direct compensation from plan members. It says that Trader Joe's did not provide sufficient disclosure of the agreement with Capital Research and that excessive compensation to the management firm is wasting plan participants' money.

Department of Labor intervenes in Wawa ERISA case

The federal Department of Labor in Washington, D.C., has intervened in a case that could have a significant effect on how workers affected by ERISA protect their rights against plan fiduciaries that make unfair changes. A class-action lawsuit representing terminated employees of Wawa, a large convenience store chain, accuses Wawa, its employee stock ownership plan (ESOP) trustees and plan administrators of violating ERISA, the Employee Retirement and Income Security Act of 1974. The law aims to protect employees from losing their pensions, health insurance, disability insurance and other employee benefits due to plan administrators' misconduct.

According to the lawsuit, Wawa's ESOP amended its plan in 2015, eliminating the previously existing right of terminated employees to continue to hold stock under the program. They also forced terminated employees to accept a liquidation payment for their existing stock holdings at a fixed price, which the complaint alleges sat below market value. They also say that ERISA was violated when plan administrators provided misleading information that led them to lose out when the stock later grew in value.

Building a good administrative record in ERISA appeals

Many workers in the District of Columbia have benefits plans through their employers that are covered by ERISA. When workers apply for benefits from their ERISA plans and are denied, they can appeal the denials. However, the workers must exhaust the internal appeals within the plan before they can file lawsuits.

During the internal appeals process, the plan administrator will work to build the administrative record. Workers can secure additional evidence and ask for it to be added to it. For example, a worker might complete additional medical tests and submit those to the plan. In some cases, the additional evidence that workers add to the record helps them to win their internal appeals. In others, they will exhaust their internal remedies and be left with having to file a claim in court.

ERISA benefits claims litigation can protect wronged workers

Under the law, Washington, D.C., employers do not need to provide their workers with employee benefits like disability insurance or retirement plans. However, many workers specifically choose their jobs because of the attractive benefits on offer, and employee benefits can help companies secure the best and most experienced workers. However, once those benefit plans are in place, companies have an obligation under the Employee Retirement Income Security Act (ERISA) of 1974 to handle those benefits responsibly and act according to the workers' best interests. If you are facing serious problems with your benefits, you first need to understand your rights under ERISA.

ERISA requires that certain standards are upheld in the private sector. When benefits plans deprive workers of much-needed claims or squander retirement funds, entire communities of people may be devastated. On an individual level, an unjust disability benefits denial may lead to severe financial suffering for you and others who depend on you. You may be relying on those funds to cover your housing, medical costs or transportation needs, and an unjust denial can leave you struggling to get by or even pay for your medical treatment.

Supreme Court hears case from IBM employees

On November 6, an attorney representing employees of IBM told the Supreme Court in Washington, D.C. that the employees should be allowed to sue the company's retirement fund managers because they did not disclose that the company's stock was overvalued. IBM's 401(k) plan invests in company stock. The Supreme Court will decide whether the Employee Retirement Income Security Act requires fund managers to disclose to employees drops in stock value that result from wrongdoing. In this case, stocks dropped because the microchip-making division had issues.

According to a friend-of-the-court brief filed by the U.S. Chamber of Commerce, if IBM loses, this could lead to other companies' reluctance to include company stock in retirement plans. There are a number of other class-action lawsuits that also assert that there is a fiduciary duty to inform employees of wrongdoing that leads to stock drops.

MIT ERISA lawsuit moves toward settlement

Employees in Washington, D.C., and across the country are protected by the provisions of the Employee Retirement and Income Security Act of 1974, or ERISA. The law contains regulations that require companies with employee benefits plans, including retirement funds, disability plans and health insurance programs, to provide explicit documentation and manage those plans in the best interests of the workers. When companies fail to do so, they can be held accountable in court, and significant damages can be assessed. One case involving the Massachusetts Institute of Technology retirement plan is moving toward a settlement.

Participants in the MIT plan sued the university in an ERISA benefits claim, accusing plan administrators of breaching their fiduciary responsibility to the plan participants. In the settlement, the university will pay $18.1 million to the class of plaintiffs, including covering their legal fees. The settlement funds will be divided among the class members based on how long they were involved in the plan and the amounts they invested. Beyond the financial settlement, however, the document also puts in place a number of specific rules that will govern the behavior of the fiduciaries running the MIT plan in the coming years. The plaintiffs in the case agreed that they would not come back to court on the issues in question in the case.

Plan participants receive compensation for ERISA violation

Businesses and plan administrators overseeing employee benefits in Washington, D.C., have legal responsibilities to uphold to the workers enrolled in a health, retirement or disability plan. Under the Employee Retirement Income Security Act of 1974, plan administrators must respond to participants' and beneficiaries' requests for certain documents, including basic plan descriptions and summaries of coverage. They have 30 days to respond without penalty, but they could be fined up to $110 each day afterwards.

One federal court case illustrates that these fines are not simply an attempt at deterrence that are rarely assessed in reality. In this case, an employer set up a group health insurance plan for its employees but later failed to pay the premiums. As a result, the coverage was cancelled due to the employer's failure to pay, but several plan participants were left with unpaid medical claims. In an attempt to deal with the claims, these participants requested certain plan documents from the administrator in accordance with ERISA. However, the administrator never replied to their requests for the documents, and the participants sued over a wrongful denial of benefits. They later added a claim specifically for the ERISA violations in the case.


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