Employer's Plan Pays for Ignoring Requests

February 11, 2008

An employer did not understand two major administrative functions related to its ERISA plan. As a result, the employer had to pay a fine even while the litigation continued in the case of Weddell v. Whirlpool Production Employees Retirement Plan Committee.

What were the two mistakes?

Mistake #1. When Kimberly Weddell (Weddell) applied for disability retirement under Whirlpool's retirement plan, the third party administrator, Unicare, denied the claim on the basis that she was not totally and permanently disabled. When Weddell appealed the decision, Unicare denied the appeal and told her she could further appeal to Whirlpool's Retirement Plan Committee. When she appealed to the committee, it ignored her appeal. The plan committee thought the final decision maker was Unicare. However, Whirlpool’s service agreement with Unicare clearly designated the plan committee as the final decision maker.

Mistake #2. Unicare told Weddell that she could request all relevant documents from the plan committee "free of charge." When she made the request, the plan committee sent her the summary plan description and told her that all other documents would require a fee of 25 cents per page. While ERISA permits plans to charge a reasonable copying fee in response to normal document requests, the DOL's claims procedure rules require plans to provide all relevant documents without charge. The plan committee finally provided the documents once litigation began, almost eight months after they should have been given.

The court concluded that the plan committee's communications were "incorrect, confusing, and inadequate to meet its duty under ERISA." The court reversed Weddell's claims denial, directing the plan committee to conduct a full and fair review, and assessed a $14,220 penalty ($60 perday times 237 days) against the plan committee for its document delay.

ERISA's daily penalties are available for document failures related to any ERISA plans, including health plans. While some courts refuse to assess these penalties for plan failures during a claims appeal, the principle is simple: do not ignore a document request.