A recent case illustrates how following reasonable administrative procedures can help protect ERISA plan sponsors and fiduciaries from liability. In Foster v. PPG Industries (10th Cir. 2012), Mr. Foster, a former employee of PPG Industries (“PPG”), maintained an account in PPG’s 401(k) plan. Mr. Foster and his spouse divorced. Mr. Foster moved out of the marital residence, but did not inform PPG of his change of address until approximately fourteen months later. During this time period, PPG mailed information to the marital residence about how to establish a new user ID and password to gain electronic access to Mr. Foster’s account. The communication was labeled, “To Be Opened by Addressee Only.”
Mr. Foster’s ex-spouse received this letter and took the steps necessary to gain access to Mr. Foster’s account. Over the course of several months, she withdrew all of the funds in Mr. Foster’s account.
Mr. Foster brought suit against PPG and the plan under ERISA. Mr. Foster alleged, in part, that his benefits had been improperly forfeited. The Court concluded that the defendants had taken no steps to forfeit Mr. Foster’s account. Instead the responsibility rested with Mr. Foster for failing to inform the defendant of his new address.
Takeaways:
- Plan sponsors and plan fiduciaries that follow reasonable administrative procedures will not be responsible if a third party commits fraud against a plan participant.
- Plan participants can protect themselves against someone taking over their identity if they timely inform the plan sponsor of an address change.