Retiree Can’t Profit From Mistaken Communication, Court Rules.
Mistakes can and do happen. This includes mistaken communications as to when a retiree is entitled to take her pension distribution. But can a retiree profit from such mistaken communications? The answer will depend on the facts and circumstances of the particular situation. Here’s what happened in a recent case that dealt with this situation. Harris v. Am. Elec. Power Serv. Corp., No. 2:23-cv-769, 2024 U.S. Dist. LEXIS 182748 (S.D. Ohio, Oct. 7, 2024).

Lorraine Harris was a participant in a 401(k) plan sponsored by American Electric Power (AEP), her employer. On January 31, 2020, Harris retired from AEP. On February 19, 2020, Harris directed the plan’s record keeper, Empower Retirement LLC, to distribute to her the balance in her 401(k) account which, at the time, had a value of $1,698,545. According to Harris, Empower agreed to send her a check the next day for this amount. When that did not happen, Harris contacted Empower who advised that it had mistakenly told her she could get an immediate distribution of her 401(k) account balance when the plan, in fact, state there is a mandatory 30-day waiting period after termination of employment before an account balance may be distributed.
On March 2, 2020, Empower informed Harris that it was processing her distribution request and that her account balance had dropped to $1,547,470–over $150,000 less than the amount Empower had previously told Harris would be mailed to her on February 29, 2020. For its mistake in providing incorrect information as to when Harris could receive her 401(k) account balance Empower offered Harris $51,797 as a good-will gesture, bringing her total distribution to $1,599,675. In Harris’s view, she was still owed another $98,870, reasoning that Empower should have put her account balance into a “safe harbor” cash account during the 30-day wait period so it would not lose value given the volatile nature of the market at that time due to the COVID-19 outbreak. So, Harris sued Empower and AEP in federal court, seeking this amount, alleging they had breached their fiduciary duties to her.
In response, Empower and AEP moved to dismiss the complaint, reasoning that Empower was not a fiduciary because it only performed ministerial functions for the plan and, as for AEP, there could be no fiduciary breach because the plan required the 30-day waiting period and did not require that a participant’s account balance be placed into a safe harbor cash account during the wait. The court agreed and granted defendants’ motion to dismiss, reasoning that Harris was only entitled to the benefits she was due under the terms of the plan.
So, what can we learn from this case? It is simply that courts generally rely on the terms of the plan in deciding what benefits a participant is or is not entitled to receive. However, as will be discussed in future blogs on this website, there are several exceptions to this general rule. So, stay tuned!
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