Robert Hartman worked for Weatherhead for nearly a quarter century before his retirement in 1976. As an employee of Weatherhead, Hartman was a participant in the Weatherhead Pension Plan for Salaried Employees. In 1979, Weatherhead was purchased by Dana Corporation. A subsidiary of Dana became plan sponsor and plan administrator of the plan.

In March 1979, an early commencement request was sent to Hartman with instructions that he sign and return the enclosed election form. The election form provided that Hartman understood he was to receive a single life annuity. Hartman signed and returned the request. Notwithstanding this election, Hartman’s wife understood that he had elected a joint and survivor annuity, and she maintained that she never executed a spousal waiver. Indeed, the default payment method for a married participant under the plan was a 50 percent joint and survivor annuity. Following Mr. Hartman’s death in April 2011, Mrs. Hartman contacted Dana to inquire into her rights to a survivor annuity.

Over the next year, Mrs. Hartman and her attorney made numerous requests for Mr. Hartman’s election form, a spousal waiver form, and the 1979 plan document and summary plan description (SPD), although a written request to Dana was not made until May 2012 as part of a claims appeal letter. On June 6, 2012, Dana provided Mr. Hartman’s election form. No other documents were provided at that time. After being advised that Dana considered the election form to resolve the issue, Mrs. Hartman filed suit against the company for its failure to provide the documents she requested, among other claims. Although Dana eventually produced the SPD in effect during May 1979, the SPD did not answer the question of whether a spousal consent was required for a married participant to elect a form of benefit other than the 50 percent joint and survivor annuity.

Section 502 of the Employee Retirement Income Security Act of 1974 (ERISA) creates a cause of action under which participants and beneficiaries (a beneficiary includes a person who may become entitled to benefits under the plan) may bring suit for a plan administrator’s failure to provide documents under which the plan is established or operated within 30 days of a participant or beneficiary’s written request for those documents. A noncompliant plan administrator may be held liable for up to $110 per day for failing to produce the requested documentation within the required 30 days.

As a threshold matter, the court found Mrs. Hartman to be a “beneficiary” at the time she filed suit because it was unclear whether her consent was required for Mr. Hartman to elect a single life annuity; the fact that the SPD made no mention of a spousal consent requirement was irrelevant for purposes of establishing Mrs. Hartman’s status as a beneficiary. The court then found that Dana was obligated by ERISA to provide the historical plan document and SPD to Mrs. Hartman because they contained information necessary for her to understand and assert her rights under the plan. As a result, the court imposed a penalty of $10 per day, ending on the date the relevant SPD was provided to Mrs. Hartman, resulting in an aggregate penalty amount of $4,470. The lower fee (i.e., $10 per day instead of $110), reflected the facts that there was no evidence of bad faith by Dana and that Mrs. Hartman was not actually harmed.

While the statutory penalty in this instance might be described as relatively nominal, the importance of maintaining historical plan documents cannot be understated. In addition to the potential for statutory penalties for the failure to provide requested plan documents, missing historical plan documentation potentially makes defending claims for benefits and assertions of a breach of fiduciary duty under ERISA more difficult to defend. Issues could also arise with respect to a plan’s qualified tax status. At the same time that more and more employers are shifting toward pre-approved plan documents, the IRS has announced that it generally will no longer review a determination letter application with respect to an ongoing pre-approved plan because it would have already reviewed the form of the plan document submitted by the document provider. However, in our experience, when an employer applies for an IRS determination letter on plan termination, or when the IRS reviews a determination letter application for a plan into which a pre-approved plan has been merged, the IRS requests all plan documents in effect since the terminating or merged plan last received an IRS determination letter. In the case of a pre-approved plan that has never received a determination letter, this can prove difficult.

To guard against potential issues related to missing historical documentation, a number of steps are recommended: (1) plan officials should carefully review services agreements with plan service providers to analyze what the agreement says about document retention, both during the period the service provider is retained and at termination of those services and (2) in the context of corporate transactions, if the employee handling benefits at the target company is to be terminated following the closing, the surviving company should make sure it knows the status and location of the target company’s benefits records before the employee leaves – or, in a perfect world, make sure it has received all historical plan documents during the course of its due diligence. (Hartman v. Dana Holding Corp., N.D. Ind., 2013)