Recently, our blog has highlighted the deluge of news surrounding the Employee Retirement Income Security Act of 1974 recently. From settlements to new Department of Labor rules, ERISA has become a hot topic in Washington, D.C., and throughout the country. Another ERISA case hitting the news involves the United Parcel Service of America, commonly known as UPS. This case demonstrates the importance of exhausting administrative remedies, and it is from the U.S. District Court for the Northern District of Georgia’s Atlanta Division.
The plaintiffs claimed that UPS violated their fiduciary duties in their value calculations of their joint and survivor annuity benefits, which are paid out from UPS’s pension plan relative to the value of the plan’s standard single life annuity option. Essentially, the argument was that UPS failed to pay JSA benefits in an amount that is actuarially equivalent to the SLA. The plaintiffs also claimed that the interest rates used for the JSA benefits are outdated.
Actuarially equivalency is required by ERISA to protect retirees’ vested retirement benefits. The discrepancy between JSAs and SLA pay outs can cause retirees to lose part of their vested retirement benefits.
The finding: Administrative remedy exhaustion
Unfortunately, the ruling appeared to not really broach the actuarially equivalency argument because the plaintiffs in this case did not exhaust their administrative remedies before filing the court. Before litigating ERISA claims, the judge explained that the plaintiffs must first explore all of their administrative, non-litigation, remedy options.
The plaintiffs argued that the administrative remedies they did not use would have been futile, but the court was unmoved. The judge stated that strict enforcement of the exhaustion requirement reduces the number of frivolous lawsuits under ERISA. This, in turn, reduces the dispute resolution cost, enhances the plan administrator’s ability to fulfill their fiduciary duties by preventing premature litigation and
This case again shows the complicated nature of ERISA litigation, and why it is so important to seek legal counsel early in the process. ERISA is constantly changing, and each case is very fact dependent.