Benefits Manager Who Lacked Discretionary Authority is Not ERISA Fiduciary: Second Circuit
The US Court of Appeals for the Second Circuit ruled in Tocker v. Kraft Foods North America, Inc. Retirement Plan that an employee whose job duties for an Employee Retirement Income Security Act of 1974 (ERISA) plan were ministerial and non-discretionary does not qualify as a plan fiduciary and cannot be sued for an alleged breach of fiduciary duty.
On August 29, 2012, the US Court of Appeals for the Second Circuit ruled in Tocker v. Kraft Foods North America, Inc. Retirement Plan that a mid-level benefits manager whose job duties for an ERISA plan were ministerial and non-discretionary does not qualify as a plan fiduciary and cannot be sued for an alleged breach of fiduciary duty.Close speedread
On August 29, 2012, the US Court of Appeals for the Second Circuit issued an opinion in Tocker v. Kraft Foods North America, Inc. Retirement Plan, holding that a mid-level benefits manager whose job duties for an ERISA plan were ministerial and non-discretionary does not qualify as a plan fiduciary and cannot be sued for an alleged breach of fiduciary duty.
The plaintiff, Edward Tocker, was employed at General Foods (later, Kraft Foods) and participated in the company's retirement plan. In 1989, Tocker was diagnosed with a brain tumor and was given six to 18 months to live. Although initially offered a choice between long-term disability benefits and a lump-sum payment in connection with participation in the company's workforce reduction program, Tocker's supervisor suggested to company management that a special arrangement be made for Tocker. The company's benefits administration manager, Robert Varone, proposed an arrangement to senior management under which Tocker would receive both disability benefits until 2001 (when he turned 65) and the lump-sum payment, which senior management adopted and Tocker subsequently accepted.
In 2001, Tocker requested a pension estimate and was informed by the company that he would not receive pension credit for the years after the special disability arrangement went into effect. In response, Tocker filed suit against Kraft and Varone, alleging that the defendants' denial of pension credits violated ERISA. The district court granted summary judgment for the defendants. The Second Circuit affirmed the grant of summary judgment for Kraft but remanded to the district court to determine whether Tocker could sustain a breach of fiduciary duty claim against Varone. The district court granted summary judgment to Varone.
On appeal, the Second Circuit affirmed the judgment of the district court. The sole contested issue was whether Varone acted in a fiduciary capacity when he researched and communicated to Tocker the benefits that he would receive under Kraft's retirement plan. The court noted that, under ERISA, a person is a plan fiduciary if he:
Exercises discretionary authority or control over management of a plan, or any authority or control over management or disposition of plan assets.
Has any discretionary authority or responsibility over plan administration.
Renders investment advice for a fee or other compensation regarding plan money or property, or has authority or responsibility to do so.
Non-fiduciaries include plan employees who perform only ministerial tasks, including:
The application of rules determining eligibility for participation.
Preparation of plan communication materials.
The calculation of benefits and the maintenance of employee records.
The court concluded that Varone was a mid-level benefits manager with responsibilities that were ministerial in nature and non-discretionary after examining Varone's work duties, which included:
Calculating pension benefits.
Answering employee benefit questions.
Receiving and recording benefit elections.
Ensuring that employees received benefit information and enrollment materials.
The court rejected Tocker's argument that Varone was a fiduciary because Varone determined Tocker's benefits and communicated the information to him. Applying eligibility rules, the court held, is a ministerial function. Although a fiduciary's responsibilities may include communicating plan information, the court noted, it held that the mere act of doing so is not sufficient to confer fiduciary status.
Tocker also argued that Varone exercised discretionary authority in creating the special arrangement with Tocker, and that the arrangement was merely "rubber-stamped" by Kraft. This argument failed, the court held, since the record showed that the impetus for the particular arrangement had come from senior management rather than Varone, who was charged merely with investigating whether the arrangement could be carried out.
For plans and employers, the case clarifies the conditions under which employees may be considered plan fidiciaries. It indicates that where an employee's duties are ministerial in nature, such as a mid-level benefits administration manager, and the employee does not exercise discretionary authority, a court is unlikely to find fiduciary status for that employee under ERISA.
For more information on fiduciary duties under ERISA, see Practice Notes, ERISA Fiduciary Duties Overview (www.practicallaw.com/5-504-0060) and ERISA Fiduciary Training (www.practicallaw.com/8-518-9686).