Former employee’s suit to recover benefits under terminated plan time barred

A former employee who did not receive vested pension benefits after the plan was terminated was not allowed to bring suit 17 years later to recover the funds, as the alleged fiduciary breach did not involve fraud or concealment, the United States Court of Appeals in Chicago (CA-7) has ruled.

Failure to disburse account of former employee

An employee worked for a company until 1974, accumulating a fully vested retirement benefit under the employer’s pension plan of over $5,976. Shortly after leaving the company, the employee sought to remove the funds. However, she was informed by the plan trustee that the plan had been in amended in 1975 to increase the retirement eligibility age from 55 to 65.

Over the next ten years, the employee received account statements, indicating that she was receiving from 5% to 5.50% interest on her account balance. By March 1988, the employee’s updated account balance was over $12,602. The plan dissolved on December 31, 1991. Seventeen years later in September 2008, the employee requested an updated balance. However, she was informed that the plan had been dissolved and its funds completely disbursed. The employee, however, did not receive a payout, purportedly because she could not be located.

In June 2009, the employee filed suit against the plan trustee, company, and pension plan, alleging breach of fiduciary duty under ERISA. In August 2012, a federal trial court granted summary judgment against the employee, determining that all of her claims were time-barred. The employee appealed.

Fraud or concealment exception

Under the general rule, the limitations period expired in 1997 (six years after the termination of the plan in 1991). However, the employee maintained that she was allowed additional time to file suit under the provision of ERISA §413 that allows an action involving fraud or concealment to be brought within six years after the date the breach or violation is discovered.

Specifically, the employee maintained that the trustee’s fraudulent concealment (e.g., failure to provide SPDs) prevented her from discovering that the plan would not pay her any benefits until September 2008. Pursuant to this interpretation, the employee claimed her suit was filed within the applicable statute of limitation period (September 2014). However, the court found no evidence indicating that the trustee concealed plan information or engaged in a “trick or connivance” intended to exclude suspicion and prevent injury. The court was not inclined to infer that the trustee engaged in concealment solely because the employee allegedly never received plan updates.

Source: Laskin v. Siegel (CA-7).

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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