ING's ERISA Penalty Partly Tossed by Ninth Circuit

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

July 25 — ING North America Insurance Corp. convinced a federal appeals court to partly undo a $27,475 judge-imposed penalty in a dispute over disability benefits with a former employee ( Lee v. ING Groep, N.V. , 2016 BL 237514, 9th Cir., No. 14-15848, 7/25/16 ).

In erasing part of the penalty, the U.S. Court of Appeals for the Ninth Circuit held that a benefit plan governed by the Employee Retirement Income Security Act can't be liable for statutory penalties for failing to follow appropriate claims procedures, because those penalties can be assessed only against plan administrators and not plans themselves. This clarified prior precedent and adopted the views of seven other federal appellate courts.

The decision turned on the fact that ERISA plans and the administrators of those plans are distinct legal entities under the statute. An ERISA plan's failure to follow the statute's claims procedures doesn't give rise to civil penalties, because those penalties can only be assessed against “plan administrators” for failing to produce requested documents, according to the Ninth Circuit.

This adopted the view taken by the U.S. courts of appeals for the First, Second, Third, Sixth, Seventh, Eighth and Tenth circuits. The court also clarified that language in one of its prior decisions suggesting an opposing viewpoint was “non-binding dicta.”

Given this, the Ninth Circuit vacated the portion of the disputed $27,475 penalty that was attributable to ING's failure to produce certain requested e-mails to a former employee who sought disability benefits in connection with his hepatitis C and cirrhosis of the liver.

However, the Ninth Circuit said that ING was properly penalized for failing to timely produce the ERISA plan document, although it instructed a district judge to reconsider the precise amount of this penalty.

Senior Judge Jerome Farris wrote the court's July 25 opinion, which was joined by Judges Diarmuid F. O'Scannlain and Morgan Christen.

On the same day, the judges also released an unpublished memorandum affirming ING's decision to terminate the employee's disability benefits and dismissing as untimely the employee's claim that he was fired in retaliation for exercising his rights under ERISA.

Christen partially dissented from that memorandum decision, arguing that the employee should have a second chance to make his retaliatory discharge claim. Christen also expressed concern that the majority's holding would prompt “premature lawsuits.”

Beus Gilbert PLLC represented the employee. Lewis Roca Rothgerber Christie LLP and Nilan Johnson Lewis PA represented ING.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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