The ERISA statute authorizes a court to award a penalty of up to $110 per day based on the failure of an Administrator to respond to a participant’s or a beneficiary’s request for plan documents. The term “Administrator” is defined under ERISA as “the person specifically so designated” under the plan or the plan sponsor if no one is named. 29 U.S.C. § 1002(16)(A). Claimants often argue that a plan insurer can be liable for penalties as the “de facto plan administrator” because it administers claims under the plan. This interpretation of the statute has been rejected by nearly every circuit, including most recently the First Circuit in Tetreault v. Reliance Standard Life Ins. Co., 769 F. 3d 49 (1st Cir. 2014).

In Allena Burge Smiley v. Hartford Life and Accident Insurance Company, et al., No. 15-10056 (11th Cir. 2015), the Eleventh Circuit took a step closer to joining ten other circuits that have refused to recognize ERISA penalty claims against de facto plan administrators. Dr. Smiley, a dentist, brought an ERISA penalty claim against Hartford in connection with her claim for disability benefits. Hartford was the third-party administrator only for the Smile Brands’ LTD Plan and did not insure benefits under the plan. Smile Brands was identified in the plan documents as the Administrator and it retained authority to make final claim decisions. The Eleventh Circuit concluded that a claim for penalties cannot be brought against third-party administrators and affirmed the judgment in favor of Hartford.

While the Eleventh Circuit reached the right conclusion in Smiley, its reasoning is suspect. The court concluded that because Hartford did not have authority to make the final claim decision, it could not be considered a plan administrator. But whether an entity makes the final eligibility decision has nothing to do with whether it fits within the definition of the term “Administrator.” The Eleventh Circuit overlooked the fact that a plan can have multiple fiduciaries performing different functions. In most cases, a plan’s insurer will have the authority to make the final claim decision and will even identify itself as a fiduciary of the plan. This does not mean, however, that the insurer has agreed to assume the duties of the Plan Administrator to disclose plan documents or that it can be liable for penalties. In most cases, the plan insurer will not even have copies of the plan documents other than the policy.

Following the reasoning in Smiley, if Hartford made the final claim decision, a claim for penalties could be brought against it. Every other circuit to address this issue has said no. In addition to the First Circuit’s decision in Tetreault, this list includes Lee v. Burkhart, 991 F.2d 1004, 1010 (2d Cir. 1993); Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 62 (4th Cir. 1992); Benham v. Disability Portion of Life & Disability Plan, 6 Fed. App’x 280 (6th Cir. 2001); Klosterman v. W. Gen. Mgmt., Inc., 32 F.3d 1119, 1122 (7th Cir. 1994); Brown v. J.B. Hunt Trans. Serv., 586 F.3d 1079 (8th Cir. 2009); Moran v. Aetna Life Ins. Co., 872 F.2d 296 (9th Cir. 1989); Thorpe v. RetirementPlan of the Pillsbury Co., 80 F.3d 439, 444 (10th Cir. 1996); Davis v. Liberty Mutual Insurance Co., 871 F.2d 1134, 1139 n. 5 (D.C. Cir.1989).

Each of these courts refused to recognize penalty claims against “de facto” plan administrators because the term “Administrator” is specifically defined in the ERISA statute. If an entity does not fit within that definition, there can be no claim.

The court in Smiley relied on the Eleventh Circuit decision in Oliver v. Coca Cola Co., 497 F.3d 1181, 1194 (11th Cir. 2007), which in turn cited to the First Circuit’s decision in Law v. Ernst & Young, 956 F.2d 364 (1st Cir. 1992), as recognizing de facto plan administrators in some situations. In Tetreault, the First Circuit clarified its earlier decision in Law, stating:

Law was careful to distinguish the case before it, which involved an employer with “little, if any, separate identity” from the internal retirement committee that had been designated as the “plan administrator,” from cases involving “attempts to recover against entities which were clearly distinct from the plan administrator.” And this same distinction takes care of Tetreault’s argument here. Tetreault seeks penalties from an entity – Reliance Standard – that is entirely separate from the expressly designated “administrator.”

The decision in Tetreault calls into question the Eleventh Circuit’s reliance on Law and the basis for its conclusion allowing for penalty claims against de facto plan administrators. Hopefully, the Eleventh Circuit will follow the lead of the First Circuit and join the numerous other circuits that have refused to recognize ERISA statutory penalty claims against insurers under the guise of de facto plan administrators.