What’s worse than playing games with your employees’ retirement savings? Well, probably not much, from both a moral and legal perspective. The heavy hand of the plaintiff’s bar, and possibly the Department of Labor, will come looking for you if you do.
But one thing that makes such an event worse for a plan sponsor or fiduciary, from a legal and liability perspective in any event, is retaliating against the employee who ratted you out in the first place. This is because ERISA includes an anti-retaliation provision, section 510, by which a plan participant can sue for damages if retaliated against for seeking to recover, obtain or protect his or her benefits under an ERISA governed plan.
Now, in my experience, participants in a plan who have been engaged in long disputes with a plan administrator over benefits or plan administration often come to believe that they are being targeted by a hostile administrator in response and are therefore being retaliated against. In some cases, those participants are right in their perceptions. But contrary to what many participants caught in that scenario may believe, they are almost never sitting – despite what complaints, often legitimate, they may have about the conduct of a plan sponsor or administrator – on a viable claim for retaliation under ERISA. Instead, a viable cause of action under ERISA for retaliation requires, to succeed, a strong linkage between a job action or other harmful decision and the participant’s request for benefits or effort to protect those benefits. Most of the typical disputes that go on day after day between participants and plan administrators don’t rise to this level, no matter how it feels to the particular participant trapped in the dispute.
Instead, a viable ERISA claim for retaliation looks much more like the facts of this case, in which the Department of Labor recovered several hundred thousand dollars in back pay and other damages for a trio of employees and plan participants who blew the whistle on malfeasance by a plan fiduciary and cooperated with a federal criminal investigation. As Planadvisor summed up in an article on the case:
Prior to her termination, Robbins complained internally that Scott Brain, a trustee and business manager for Cement Masons Local Union 600, was violating the federal Employee Retirement Income Security Act (ERISA). In 2011, she cooperated with a federal criminal investigation into Brain’s activities. Upon learning of her cooperation, the joint board of trustees voted to place Robbins on administrative leave, until such time that her department was outsourced.
Later, "when the company outsourced Robbins’ department to a third-party administrator, Robbins was the only employee not retained by the new employer."
Now that’s retaliation in violation of ERISA. And from the perspective of a plan sponsor or administrator, that is just plain making a bad situation worse.