ERISA-Sixth Circuit Rules That Plaintiffs Need Not Exhaust A Plan’s Administrative Procedures Prior To Filing Suit In Federal Court, When They Assert Statutory Violations Of ERISA

In Hitchcock v. Cumberland University 403(b) DC Plan, No. 16-5942 (6th Cir. 2017), the Plaintiffs were appealing the order entered by the district court, granting the motion of the Defendants (namely, Cumberland University and its 403(b) plan) to dismiss their ERISA claim.  The Sixth Circuit Court of Appeals reversed the district court’s judgment, and remanded the case back to the district court.

In this case, the Plaintiffs were employees of Cumberland University (the “University”), and were participants in its 403(b) plan (the “Plan”).  The Plan is a defined contribution 403(b) plan.  In 2009, the University adopted a five percent matching contribution, whereby the University would match an employee’s contribution to the Plan, up to five percent of the employee’s salary.  On October 9, 2014, the University amended the Plan, retroactive to January 1, 2013, to replace the five percent match with a discretionary match, whereby the University would determine the amount of the employer’s matching contribution on a yearly basis (the “Amendment”).  The University also announced that the employer matching contribution for the 2013-14 year, and for the 2014-15 year, would be zero percent.

With regard to amending the Plan, the 2009 Summary Plan Description (the “2009 SPD”) states that an Employer cannot amend the Plan to take away or reduce protected benefits under the Plan.  That SPD also promises that all Plan Participants shall be entitled to obtain, upon request to the Employer, copies of documents governing the operations of the Plan, including an updated Summary Plan Description.  As of the date of oral argument in this case, January 25, 2017, the University had not produced a summary plan description subsequent to the 2009 SPD, despite Plaintiffs’ repeated requests, and had not provided formal written notice of the Amendment.  The Plaintiffs filed a class action against the Defendants, alleging among other things, an impermissible cutback of benefits and a breach of fiduciary duty, both in violation of ERISA.

The district court dismissed the case, without prejudice, applying administratively exhaustion principles to the claims.  The Court reversed, and remanded the case back to the district court.  It held, as a matter of first impression in the Sixth Circuit, that plan participants or beneficiaries do not need to exhaust internal remedial procedures (that is, the plan’s administrative procedures) before proceeding to federal court when they assert statutory violations of ERISA.

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