Opinion ID: 3033243
Heading Depth: 3
Heading Rank: 2

Heading: The Structure of ERISA

Text: [8] In addition to fiduciary duties, ERISA imposes reporting and disclosure obligations on a plan administrator. The reporting and disclosure provisions, see 29 U.S.C. §§ 10211031, are set forth separately from the fiduciary duty provisions, see 29 U.S.C. §§ 1101-1114. This separation suggests that an administrator’s satisfaction of specific reporting requirements does not necessarily satisfy its fiduciary responsibilities. Indeed, to say that compliance with Part One of ERISA would also satisfy obligations under Part Four would render the Act’s fiduciary protections a nullity, or at least surplusage. See TRW Inc. v. Andrews, 534 U.S. 19, 31 (2001) (quotations and citations omitted) (“It is a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.”). [9] Therefore, in order to give meaning and effect to ERISA’s fiduciary purpose, more must be required of an administrator than mere compliance with ERISA’s express reporting and disclosure provisions. In other words, “[i]f the fiduciary duty applied to nothing more than activities already controlled by other specific legal duties, it would serve no purpose.” Varity, 516 U.S. at 504. [10] Moreover, although HBI’s notice—within approximately three months of the LTD policy cancellation—would satisfy the reporting and disclosure requirements set forth in § 1024(b)(1), a termination is not the equivalent of a change 10908 PERALTA v. HISPANIC BUSINESS or modification.10 See Black’s Law Dictionary 1155, 1641 (4th ed. 1957) (defining “modification” as “[a] change; an alteration which introduces new elements into the details, or cancels some of them, but leaves the general purpose and effect of the subject-matter intact; and “terminate” as “[t]o put an end to; to make to cease; to end”); see also MCI Telecomms. Corp. v. AT&T Co., 512 U.S. 218, 225, 228 (1994) (defining “modify” as having a “connotation of increment or limitation,” which is evidenced by the fact that nearly every dictionary says “ ‘to modify’ means to change moderately or in minor fashion,” and that “ ‘modify’ does not contemplate fundamental changes”). [11] Unlike a change or modification, the termination of a plan leaves an employee without any coverage whatsoever. See Rucker, 806 F. Supp. at 1459 (stating that “a termination of benefits affects a beneficiary’s rights to a much greater degree than compared to a mere modification”). If the statute’s 210-day notification period were to apply, employees, unknowingly, would be at risk of having no coverage for seven months. A seven-month notification period hardly can be considered the meaningful disclosure mandated by ERISA or the “prompt” notification set forth in Willet, 953 F.2d at 1340.11 As we stated in Blau, [t]he administrator of an employee welfare benefit plan . . . has no discretion to secrete the plan, to flout the reporting, disclosure and fiduciary obligations imposed by ERISA, or to deny benefits in contravention of the plan’s plain terms. 29 U.S.C. §§ 1101- 10 While the LTD plan may not be the only welfare benefit plan provided by HBI, it was a separate plan. 11 There is no principled reason to distinguish the suspension of an individual’s coverage from suspension or termination of coverage for the whole workforce. The same risk is simply multiplied. PERALTA v. HISPANIC BUSINESS 10909 1114 (fiduciary responsibilities with respect to plan); 29 U.S.C. §§ 1021-1031 (reporting and disclosure provisions); 29 U.S.C. § 1104(a)(1)(D) (plan must be administered “in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of [ERISA]”). 748 F.2d at 1353. [12] HBI’s notification, three months after the plan’s cancellation, does not constitute timely notification. Timely notification may in some circumstances mean prompt notification after a change has been effectuated. In other circumstances, timely notification may require prior notice. For example, timely notification of cancellation may require prior notice so that employees may purchase replacement coverage or consider alternative employment.12 See Hamilton v. Air Jamaica, Ltd., 945 F.2d 74, 78 (3rd Cir. 1991) (noting that ERISA’s reporting and disclosure requirements ensure that participants know where they stand with respect to the plan, and permit employees “to bargain further or seek other employment if they are dissatisfied with their benefits”); Hozier, 908 F.2d at 1168 (“An employee who never receives information about gaps in the coverage of his benefits package . . . is unable to make fully informed decisions about whether to purchase alternative insurance, or even to seek alternative employment.”). 12 For example, the statute sets forth a 60-day deadline for notification of material reductions in group health plans. See 29 U.S.C. § 1024(b)(1) (amended by Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191, § 101(c), to state that for “a material reduction in covered services or benefits provided under a group health plan . . . a summary description of such modification or change shall be furnished . . . not later than 60 days after the date of the adoption of the modification or change”). Obviously, some time is required to prepare a new summary when coverages are changed. No time is needed to say “plan cancelled.” 10910 PERALTA v. HISPANIC BUSINESS [13] In short, while there is no express statutory requirement to notify participants in a timely fashion of plan cancellation, such a requirement is implicit in the structure and purpose of ERISA, and is more vital than the ordinary technical reporting and disclosure requirements. Employees are entitled to know if they have or do not have an ERISA plan. Failure to so advise employees violates the obligation of a fiduciary to discharge his duties in the interest of the participants with “care, skill, prudence, and diligence.” 29 U.S.C. § 1104(a)(1)(B).