Every so often an employer sponsoring an ERISA employee benefit plan will receive a written request from a participant or beneficiary (or their legal counsel) to provide plan related documents. Sometimes the request asks for specific documents and sometimes the request is broader, asking for all instruments under which the plan is established or operated, or words to that effect. What the employer does with that request is important. In a recent decision from the U.S. District Court for the Western District of North Carolina (Kinsinger v. Smartcore, LLC (August 26, 2019)), the court assessed an employer a $41,140 civil penalty for failure to provide requested documents.

ERISA Section 104(b)(4) requires that a plan administrator must, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instrument under which the plan is established or operated. ERISA Section 502(c)(1)(B) provides that if the administrator fails to provide requested documents within 30 days, a court may hold the administrator personally liable to the affected participant or beneficiary for up to $110 per day for each violation.

In Kinsinger, the employer failed to fund the claims payment account for its self-funded group health plan and the claims administrator canceled its services, leaving several covered individuals with unpaid medical claims. As part of trying to get their benefits paid, plaintiffs requested that the plan’s administrators (members of the employer’s benefits committee) provide specific documents including the plan, summary plan description, contracts with medical providers, and any other instruments under which the employer’s plan was established or operated. The administrators received the request on June 7, 2016. However, the administrators failed to provide the requested documents until July 25, 2018 (748 days after the 30 days allowed by law) and only in response to plaintiffs’ discovery requests in their lawsuit against the employer seeking among other things, payment of the unpaid benefits.

The court awarded plaintiffs $55 per day for 748 days for a total of $41,140. In deciding on the $55 per day penalty, the court noted that plaintiffs were substantially prejudiced by the administrators’ failure to provide the documents because they were essentially left in the dark on how to appeal the plan’s refusal to pay their benefits. The court said the failure frustrated plaintiffs’ ability to litigate its benefits case and concluded that the administrators’ willingness to exploit plaintiffs’ lack of documents in the litigation evidenced their bad faith.

The court also made a few interesting points. It said that even if the administrator previously (prior to plaintiffs’ request) provided the required documents (as claimed by the administrators), they were obligated to provide them again when they received the written request. It also noted that the purpose of the up to $110 per day penalty is not to compensate a plaintiff but to punish noncompliance with ERISA.

So what should an employer do in connection with plan document requests?

  • First, train plan and human resources personnel to forward to the plan’s administrator all participant/beneficiary requests for plan related documents immediately upon receipt. Do not allow document requests to fall into the “put them aside and deal with them later” category.
  • Determine whether the requested documents exist and where they are located. For some plans, receiving a request for plan documents is when an administrator first realizes it may not have all the plan related documents required by law (and now has only 30 days to prepare them).
  • Consult with experienced employee benefits legal counsel to confirm what documents the law requires be provided upon request. Not all documents that exist in connection with a plan are “instruments under which the plan is established or operated.”
  • Prepare and maintain a file of plan related documents so that the administrator can quickly respond to document requests. Doing so will also make for more effective plan administration and assist the administrator in the event of an IRS or DOL audit.

Employers that engage in some basic advance planning and document maintenance, and consult with benefits legal counsel, can minimize the risk of being assessed ERISA failure to respond civil penalties. Potential $110 per day penalties could await those who do not.