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5500 Preparer's Manual for 2012 Plan Years
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A pension plan participant's estoppel claim against the plan failed because the participant's evidence did not show the plan's mistaken calculation of his benefit amount to be an intentional attempt to mislead him, the U.S. Court of Appeals in Chicago (CA-7) has ruled. Further, the participant failed to show that he relied to his detriment on the misrepresentation.
Severance negotiation
An employer terminated the employment of a pension plan participant. The employer agreed to negotiate a severance package for the participant, in exchange for a waiver of any claims of age discrimination the participant might otherwise make against the employer. The employer's human resources manager, who was also the plan administrator, presented the severance package to the participant at a termination meeting.
At the meeting, the HR manager also presented to the employee a pension benefit election form that contained erroneously high calculations of the monthly benefit the participant would receive if he selected one of several options for an annuitized benefit. (The calculation of his lump-sum benefit was accurate.)
Subsequently, the participant signed the severance agreement and waiver and then submitted his completed pension benefit election form. Upon review of the completed form, the HR generalist who prepared the form originally realized that the annuity calculations had overstated by several hundred dollars the monthly benefit to which the participant was entitled. She then sent a corrected election form to the participant.
Rather than return the corrected election form, the participant filed a promissory estoppel claim against the plan. He argued that the plan was required to pay him benefits as stated in the original election form because he relied on those terms to his detriment when negotiating his severance agreement.
Elements of estoppel
In affirming the district court's summary judgment award to the plan, the Seventh Circuit noted that it has yet to recognize a participant's right to bring an estoppel claim against a funded, single-employer pension plan. Statements or conduct by an individual implementing a plan will estop the employer from enforcing written plan terms "only in extreme circumstances." In addition, to prevail on an estoppel claim, a participant must demonstrate, among other things, the occurrence of a knowing misrepresentation on which the participant relied to his detriment.
The participant argued that the human resources manager intentionally overstated the amount of his pension benefit to induce the participant to accept a lower severance package. The court disagreed, concluding that none of the misrepresentation evidence offered related to the plan, because the HR manager was not acting in his capacity as plan administrator during the settlement negotiation. In any event, the fact that the original lump-sum calculation was accurate undermined the misrepresentation allegation.
The court also rejected the participant's claim that he'd relied to his detriment on the mistaken calculations when he signed the severance agreement. He undermined this argument by his own admission that he has no current wish to rescind his agreement and renegotiate the terms.
Source: Pearson v. Voith Paper Rolls, Inc. (CA-7).
For more information, visit http://www.wolterskluwerlb.com/rbcs.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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