Court Finds Custodial Agreement Must Be Provided to Participant

In a dispute as to whether he received benefits to which he was entitled, Derrick Askew requested a number of 401(k) plan documents from the plan sponsor, R.L. Reppert Inc.

In a lawsuit, Askew says there are no factual disputes concerning what documents he was provided in response to his document requests; however, he identifies a number of documents to which he claims he is entitled and has not yet received, including:

• Trust Agreements
• Custodial Agreements
• Periodic Benefit Statements
• Notice of Vested Deferred Benefits
• Disclosure of Financial Reports (Audit, Investment)
• Section 404(c) Disclosures
• Notice of Qualified Default Investment, Automatic Contribution Arrangement

U.S. District Judge James Knoll Gardner of the U.S. District Court for the Eastern District of Pennsylvania found that only a custodial agreement was required to be provided. Gardner first noted that courts agree that the plain language of the Employee Retirement Income Security Act (ERISA) refers only to “formal documents that govern the plan, not to all documents by means of which the plan conducts operations.” But, he found that the Nationwide Trust Company agreement with Reppert, Inc. does dictate important aspects about the participants’ benefits under the 401(k) plan and who is or is not responsible for the management and investment of plan funds.

According to Gardner’s opinion, the Nationwide Trust Company agreement incorporates a number of schedules that determine what investment funds a plan participant can choose to invest his or her benefits in; determine what the default investment option is; designate the authorized representative and details its duties, acts, responsibilities and obligations; and define the rights and obligations of the self-directed brokerage accounts provider. “In other words, from the perspective of a participant, the Nationwide Trust Company agreement establishes to a substantial extent where and how his or her benefits were going to be invested and who would be managing and administering his benefits account,” Gardner wrote.

Regarding the request for trust agreements, the judge found that ERISA requires that, in general, “all assets of an employee benefit plan shall be held in trust by one or more trustees. Such trustee or trustees shall be either named in the trust instrument or in the plan instrument . . . or appointed by a person who is a named fiduciary” He concluded that no provision of ERISA requires that there be an independent trust agreement separate from the plan instrument, and the plaintiff was provided with the plan document. 

Regarding periodic benefits statements, Reppert Inc. countered that it had, in fact, continuously sent those benefit statements to the address which plaintiff provided during his employment, but beginning in July 2011, those mailings were returned as undeliverable. ERISA requires only that the plan administrator “mail the material requested to the last known address of the requesting participant or beneficiary” and will not penalize any failure to do so if “such failure or refusal results from matters reasonably beyond the control of the administrator.” Since Askew had moved without informing Reppert Inc. of his new address, Gardner found that Askew’s failure to receive those benefit statements was reasonably beyond the control of the plan administrator, so Reppert, Inc. satisfied its obligation to provide periodic benefit statements.

Gardner noted that the requested “Notice of Vested Deferred Benefits” must be issued for former employees under the Internal Revenue Code, but ERISA permits Askew to sue for certain violations of ERISA, not for violations of the Internal Revenue Code.

Regarding the disclosure of financial reports (audit, investment), Gardner said it is undisputed that Askew did in fact receive the complete Form 5500 annual report that was filed with the Department of Labor (DOL). Although the request need not specifically name the documents sought, neither Askew’s initial request nor his second request make clear that the document he was actually seeking was the audit report that is generally required to be filed with the Form 5500 annual report.

As for 404(c) disclosures, Gardner found the DOL has promulgated regulations that create additional disclosure requirements for plan administrators, and the disclosures that Askew lists are only required by this regulation and not by the statute. Gardner noted that a plan administrator’s “failure to provide information required by federal regulations d[oes] not state a claim under ERISA § 502(c)(1) [29 U.S.C. § 1132(c)(1)]” because “the words ‘this subchapter’ in § 502(c) refer only to violations of statutorily imposed obligations, and that the term does not embrace violations of regulations promulgated pursuant to the statute.”

Finally, Askew conceded that the Notice of Qualified Default Investment, Automatic Contribution Arrangement is not mandatory and not subject to penalties under ERISA. Consequently, Gardner found Reppert, Inc. is not liable to plaintiff for failing to provide the notice.

The opinion in Askew v. R.L. Reppert, Inc. is here.