In a ruling that comes as good news to pension plan administrators, the United States Court of Appeals for the Eighth Circuit (whose jurisdiction includes Missouri) recently confirmed that erroneous benefit estimates generally do not amount to breaches of fiduciary duty under ERISA. (Christensen v. Qwest Pension Plan). The plaintiff in that case sued after automated benefit estimates provided to him before he retired proved to be off by at least $250 per month. He argued that the plan administrator breached its duty of loyalty by refusing to correct what it knew to be a “flawed” automated system, and that it breached its duty of care under ERISA by providing erroneous estimates.
The court had little trouble rejecting both claims. First, it noted that all of the estimates the participant received, as well as the SPD, cautioned that benefit estimates “are not binding.” The errors at issue were attributable to non-fiduciary service providers who calculated benefits, not to the plan administrator (which was a fiduciary). Errors by these non-fiduciaries could not amount to a breach of fiduciary duty. Moreover, the plan administrator was entitled to rely on the work of these non-fiduciary service providers as long as the process by which they were appointed was prudent. The participant did not challenge that process.
Finally, the fact that the automated system was not always accurate did not establish a violation of the duty of loyalty. Again pointing to the warnings given to participants that benefit estimates were not binding and subject to final review, the court found that benefit estimate systems need not be perfect to be prudent.
Mistakes happen in plan administration, but with appropriate disclaimers, such mistakes need not always result in fiduciary liability.