How Far Does a Pension Plan Have to Go to Persuade Participants to Make the Decisions that Are Right for Them Individually?

 Today's (7/30/2008) Pension & Benefits Daily issue reports on the litigation following the sad death of Mr. Allen Anderson, a hard-working man who died of cancer, Anderson v. Board of Trustees of the Northwest Ohio United Food and Commercial Workers Union and Employers' Joint Pension Fund, N.D. Ohio, No. 3:07 CV 576, 7/28/08.

This is not the usual case of a participant's having been denied treatment or coverage by a hard-hearted insurance company. Rather, when Mr. Anderson's medical leave was about to expire and he asked about his options, the administrator of his pension and welfare plans suggested that he return to work briefly, to renew his entitlement to a limited period of free extended health coverage. He did that, and, as a result, was apparently able to continue receiving the medical care his doctors recommended. However, that meant he did not retire, so he did not elect a pension with a 10-year guaranteed payment feature. Since he was unmarried, no death benefits were payable from the pension plan when he died soon after returning to active-employment status, although life insurance benefits were paid through the welfare plan.

The court held that it was a fiduciary breach for the plan representatives to fail to discuss the option of retiring with a generous death benefit with Mr. Anderson, when he asked about his choices. (It was mentioned, but not discussed, because Mr. Anderson said he was determined to go back to work and beat his cancer.)

I can't figure out whether this is an important decision or an anomaly. As I read the facts, it looks as if this participant was treated with great compassion by the plan representatives, his union and his employer, and they turned themselves inside out to try to accommodate his needs. Yet the court says he was treated "with great iniquity"--maybe the iniquity was the cancer, not the treatment by the plan, but it's amazing that the publication services could read the opinion, drenched as it must have been in the judge's tears.

The court concludes that it was imprudent and a breach of fiduciary duty for the TPA to fail to counsel him to retire with the 10-year continuous and certain pension form, because that would have provided death benefits for his family (he lived with his mother). The judge says that it was ridiculous to believe Mr. Anderson’s repeated brave statements about continuing to work and conquering his cancer, since he was clearly terminally ill.

But, based on the facts recited in the opinion, the judge seems to have reached the wrong conclusion as a matter of fact. If Mr. Anderson had retired, his retiree health insurance would have been inadequate to cover his medical costs. The plan, the union and the employer conspired to prolong his active-participant status so he could keep the health coverage he needed. Mr. Allen made the RIGHT decision, based on their advice, and the court calls it a breach of fiduciary duty.

What am I missing? Would the court have understood it better if the case hadn’t gone on summary judgment? (From the opinion, it does not appear that the court was presented with a dollar comparison of the value of the health insurance to Mr. Anderson personally versus the value of the death benefit to his mother and brother.) Is this case a dramatic extension of the “duty to inform” line of opinions, or just the melodramatic conclusion to a sad end-of-life story?