With the requirement that retirement plan administrators provide statements to retirees of account balances and benefit levels on a regular basis, the concept of including a disclaimer on the notices can be overlooked. Most administrators are reluctant to state that the benefits may be subject to change in the future. Particularly in the defined benefit plan arena, when participants request a calculation of their benefits, either before or at the time of retirement, some administrators may not want to advertise that the statement is not a guarantee.

However, a recent case out of the northern part of Ohio suggests that disclaimers may be the very thing that protects a plan administrator from a claim for breach of duty if benefits have to be recalculated or adjusted. In Spiewacki v. Ford Motor Co.-UAW Ret. Bd. of Admin., the court determined a disclaimer that repeatedly stated that benefit calculations were merely estimates and could change, protected the administrator from a claim brought to stop the change. In this case, a pensioner brought a variety of claims against Ford alleging they should be precluded from paying him a benefit level lower than his original estimate. He claimed that the miscalculation induced him to retire and the company should be “estopped” — a legal term for prevented — from reducing his benefits.

With specific reference to the estoppel claim, the court found that the plaintiff could not satisfy the requirement of “justifiable reliance.” The court ruled that because the plaintiff was clearly warned that benefit calculations were subject to correction for errors in the employee’s record and that the packet stated three times that the quoted benefit amounts were only estimates, the plaintiff could not reasonably rely on the estimates as being correct. In other words, he was clearly told “this is subject to change.”

Now while this case has particular bearing on defined benefit plans, it also can carry over to defined contribution plans where the participants receive account balance statements valued as of a specific date. Typical balance statements contain all sorts of fine print and legal language, but very rarely do they provide the statement that the account balance are subject to change in plain language in an obvious disclaimer. 

While this case is not definitive on the issue, it certainly suggests that providing participants with some sort of statement regarding the possibility that benefit levels or account balances are subject to change can serve as a reminder to participants that their retirement benefits are not guaranteed. There is no question that ERISA favors communication with plan participants, so plan sponsors and administrators might do well to consider including some form of conspicuous statement that the statement (or estimate) is not an absolute promise to pay specific benefits.

Keith R. McMurdy is a partner with Fox Rothschild focusing on labor and employment issues; he can be reached at kmcmurdy@foxrothschild.com or (212) 878-7919.

The information in this legal alert is for educational purposes only and should not be taken as specific legal advice.

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