Publication - 6/1/1999

Responding to Plan Participant Information Requests

The Reish & Luftman ERISA Controversy Report

Significance: Plan participants often ask their employers (or former employers) for information regarding their employee benefit plans. Requests range from the mundane to the adversarial. Regardless of the tone of the request, or the information being sought, plan sponsors should give top priority to responding. Failing to respond can be costly.

Discussion: Employers who sponsor retirement or health plans—and the employees who act as fiduciaries to those plans—need to be aware of their obligations to their plan participants. The failure to respond to requests for information from participants arises consistently in cases involving these plans. The plan administrator is required to provide a participant who makes a written request with a copy of the latest updated summary plan description, the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract or other instrument under which the plan is established or operated within 30 days from the date of the request.

In ERISA cases, a non-response or late response to a participant's or beneficiary's request for information is not a "no-harm, no-foul" situation. Failure to respond, or to timely respond, makes the ERISA administrator personally liable for the penalty, which a court may impose. That penalty is equal to a maximum of $110 per day from the date of the administrator's failure or refusal to respond to the request. We have handled numerous cases in which plan participants have sued the plan sponsor, the administrator and other fiduciaries for alleged failures to respond timely, or at all, to requests for information.

What makes the administrator particularly vulnerable is that it is sometimes not clear what the participant is requesting. There is often a question of whether a participant or beneficiary has, in fact, requested one of the listed documents or another "instrument under which the plan is established or operated." For example, one court has recently held that actuarial calculations do not fall within the type of information which ERISA requires a plan administrator to provide. On the other hand, some courts have held that, even if a participant fails to specifically request a document that the administrator is required to provide, the administrator must construe the request as one for the documents that the administrator is obligated to provide if the participant could have obtained answers to his or her questions by reviewing those documents.

There are some potential defenses to a participant's claim seeking this penalty. Most courts have construed the provision strictly, so that only the plan administrator (and not the plan sponsor, if the plan sponsor is not also the administrator) may be held liable. Also, some courts have declined to impose the penalty in circumstances in which the participant has not demonstrated prejudice or bad faith. However, many other courts do not read this requirement into the law, and ERISA itself does not require the participant to show that he or she has been adversely affected by the administrator's failure to respond, or that the failure to respond was done in bad faith.

At the rate of $110 per day, the total penalty with respect to a single participant's request can add up very quickly (and the penalty is imposed on a per participant basis). An administrator or plan sponsor should never assume that the court will not impose the penalty. Several courts have construed the provision to require plan administrators to provide the documents listed in the statute even if the participant's request for information does not ask for documents at all. That is, even when a participant asks the administrator a series of questions without even referring to a request for documents, the administrator may be liable for the penalty if he or she fails to give the documents to that participant.

Conclusion: If there is any doubt as to whether a participant's request for information requires the administrator to respond by sending the participant copies of the latest SPD, annual report and the other plan documents listed above, assume that it does and provide them within the specified 30 days. If there is some question about how to respond, consult with an ERISA attorney. Treat all participants as you would your customers, and do your best to give the courtesy of a response, even if you could make an argument that there is no obligation to respond. It's good practice, it's good business, it's good employee relations -- and it's less expensive than $110 per day per participant.