So many times, an employee of a company, or a representative of an insurer, answers a participant's questions about a pension plan or health care plan. When the company or the insurer is a fiduciary of that plan for ERISA purposes, what can it do to protect itself from a claim of breach of fiduciary duty, should that employee or representative give out wrong information to the participant? In Kenseth v. Dean Health Plan, Inc., No. 08-3219 (7th Cir. 2010), the Court provides some guidance on this point.
The Court said the following. The duty to disclose material information is the core of a fiduciary's responsibility. This duty requires the fiduciary to take reasonable steps to provide accurate and complete information to participants. The most important way to meet this duty is to provide to participants accurate and complete written explanations of the benefits available under the plan. To this end, the plan's summary plan description (the "SPD") must explain the terms of the plan in language that may be understood by the ordinary reader.
Further, anticipating that the plan's participants will have questions for company employees or insurer representatives about the plan, the fiduciary must exercise appropriate caution in hiring, training, and supervising the its employees and representatives whose job requires them to field questions from participants about their benefits. Thus, when the plan documents are clear and the fiduciary has exercised appropriate oversight over what its employees and representatives advise plan participants, the fiduciary will not be held liable for a breach of duty simply because the employee or representative has given incomplete or mistaken advice to a participant.
The lesson: This may be a good time for an employer or insurer to review its plan documents for accuracy, and to confirm that, where required by ERISA, the documents, such as the SPD, have been furnished to participants. An employer or insurer could also think about how it is training and supervising those employees or representatives that will interact with plan participants.