In this case, despite a plan participant's failure to properly request plan documents under the plan's procedures, the Fifth Circuit held that a plan administrator was liable for breach of fiduciary duty for failing to produce the documents. The court held that the plan administrator's duty of loyalty under ERISA required it to provide the documents where it (a) knew Kujanek wanted the documents and (b) knew or should have known that Kujanek did not have the necessary information to request a rollover distribution from his profit sharing account.

ERISA's statutory disclosure regime requires plan administrators to provide plan documents to participants who make written requests within 30 days of the request or be personally liable to the participant for up to $110 per day in statutory penalties [2]. Plan administrators have typically expected that a failure on their part to provide documentation would be comprehensively governed by this regime, such that any penalties against them would be limited to $110 per day. Notwithstanding this expectation, courts are empowered to award "in [their] discretion such other relief as [they] deem proper" [3] and courts may fashion remedies for breaches of fiduciary duty where they find such breaches, regardless of whether the underlying facts may also support the finding of statutory penalties. ERISA holds plan fiduciaries personally liable to make whole a participant affected by a breach of fiduciary duty (although employers may purchase fiduciary liability insurance to protect plan fiduciaries). Therefore, a finding of breach of fiduciary duty may be quantitatively and qualitatively more significant for a plan fiduciary than an awarding of statutory penalties of $110 a day.

In Kujanek, the court held that the plan administrator's breach of its duty of loyalty to Kujanek entitled Kujanek to relief equating to the loss and depreciation in his profit-sharing account from 2007-2008, which loss and depreciation the court found could have been avoided had Kujanek been provided with the appropriate plan documents. Because of the financial crisis that spanned 2007 and 2008 and the corresponding record decline in the stock market, the losses that Kujanek's account suffered were likely particularly pronounced and more significant than $110 a day [4], making this decision very relevant for plan fiduciaries.

(Orrick's ERISA Litigation Solution)

Action Items for Plan Fiduciaries

The Kujanek decision should put plan fiduciaries on notice that failure to communicate plan documents and information to participants may constitute a breach of their duty of loyalty with the attendant liability. Upon request, plan fiduciaries are required to provide updated summary plan descriptions (“SPDs”), summary annual reports (“SARs”), and any “bargaining agreement, trust agreement, contract or other instrument under which the plan is established or operated.” [5] This last category includes formal plan documents and informal guidelines that affect the plan’s operation. Plan fiduciaries should also note that if they know that participants require this documentation, they are required to produce it as part of their fiduciary responsibilities even if the participant does not properly request it.

Therefore, it is important that plan fiduciaries implement a comprehensive system for effective communication with and disclosure to plan participants. The system should ensure that fiduciaries provide SPDs to new participants at the time of participation. For existing participants, fiduciaries should provide SPDs upon request (within the 30-day deadline) and SARs on an annual basis. Fiduciaries, particularly those responsible for investment matters, should make sure to provide benefit statements (with investment valuation information as required by ERISA) quarterly to 401(k) plan participants. Further, fiduciaries should be prepared to readily and promptly respond to a request for comprehensive plan documentation, and should have ready access to official, up-to-date formal plan documents and trust agreements. The system should also make sure that terminated participants (like Kujanek) are fully aware of their distribution and rollover options, by making sure information regarding those options is conveyed even if the participant does not request it. Fiduciaries may wish to consult with counsel to make certain that the system accounts for all required disclosures and deadlines in connection with claims and appeals procedures under the plan.