Failure to Provide SPD Results in $17,000 Penalty - COBRA News from OnQue Technologies

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Failure to Provide SPD Results in $17,000 Penalty
December 12, 2002 Santa Rosa, CA
Summary An employer was fined for repeatedly refusing to provide a Summary Plan Description (SPD) to an employee whose disability benefits had been discontinued. The court assessed $15 per day for 1165 days for a total penalty of $17,475, noting that the employer acted in bad faith throughout the course of the litigation. Background: Terry Sunderlin sued her employer, ENI Technology, for denial of disability benefits and for damages stemming from ENI's failure to provide a proper Summary Plan Description. ENI responded to Sunderlin's first request for a copy of the plan administrator's SPD by returning her letter stating that that the person to whom it was addressed no longer worked there. Sunderlin's second request yielded a copy of the disability insurance policy. Subsequent requests were fruitless. Throughout the trial ENI maintained that the insurance policy provided to Sunderlin by the carrier constituted an SPD. Ruling: The court explained that ERISA requires the plan administrator, upon written request of any participant or beneficiary, to provide a copy of the latest updated SPD. This document must contain accurate and comprehensive information to inform participants and beneficiaries of their rights and obligations under the employer's benefits plan. It must be clearly written so as to be easily understood by the average plan participant. In this case, the insurance policy furnished to Sunderlin did not constitute an SPD because it did not contain the name of the plan, the name or address of the plan administrator, or explain the procedure for addressing denial of claims. It was written in technical jargon and contained erroneous and misleading information. Throughout the trial, ENI characterized this policy as a "booklet" intended to be an actual SPD. ENI also refused to admit that it was the plan administrator. NOTE: This case highlights the danger in relying solely on documents prepared by the insurer. They may not comply with current ERISA requirements for SPD content and may not be written in easily understood language. Providing accurate and easily understood SPDs remains the ultimate responsibility of the plan administrator. For information on SPD COBRA requirements, click here: The DOL SPD & COBRA Regs (Sunderlin v. First Reliance Standard and ENI Technology, U.S. District Court, Western District of New York, Dkt. No. 00-CV-6253, November 4, 2002)



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