ERISA: Mullins Again: Court Upholds Penalty Under ERISA For Failure To Furnish SPD On Request

The plaintiff in Mullins v. AT&T Corporation (see yesterday’s blog) did not go home empty handed. The Fourth Circuit Court upheld the lower court’s decision to impose a penalty-in the amount of $18,400-on the administrator for failing to furnish a summary plan description (“SPD”) on request. Here is what happened:

In February 2001, the plaintiff’s former counsel requested copies of the “AT&T [LTD] policy . . . and a copy of all other plan documents concerning that [LTD] policy.” Two months later, AT&T produced copies of the LTD plan and AT&T/CGLIC Agreement, but did not include a copy of the SPD. In March 2003, after litigation was initiated by the plaintiff’s new counsel, AT&T produced a copy of the SPD to the plaintiff.

First, the Court treated the February 2001 request as being a request for the SPD. Next, the Court noted that, under section 502(c)(1) of ERISA, the district court may, in its discretion, impose a penalty of up to $110 per day on a plan administrator who fails to furnish a plan document upon request by a participant. Two factors generally guide the district court’s discretion: (1) prejudice to the participant and (2) the nature of the administrator’s conduct in responding to the participant’s request for the plan document.

In this case, the district court did not find that the participant was prejudiced by the administrator’s failure to produce the SPD. However, the Fourth Circuit Court said that, while prejudice is a pertinent factor, it is not a prerequisite for imposing the penalty. The district court did find that, while the administrator had not acted in bad faith, it had failed to produce the SPD upon request, in violation of ERISA. The Fourth Circuit Court said that this failure is sufficient to impose the penalty, since the penalty was intended to punish noncompliance with ERISA. Finally, the district court had ruled that the maximum penalty of $110 per day ($100 in the case) was unwarranted, but that a penalty of $25 per day would be appropriate. The Fourth Circuit Court agreed, and upheld the imposition of the $18,400 penalty.

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