The United States Court of
Appeals for the Sixth Circuit has ruled that an employer breached its
fiduciary duty by furnishing a participant with a misleading summary
plan description ("SPD") In Stiso v. International Steel
Group, a participant sued his employer, alleging an ERISA breach
of fiduciary duty for the refusal to increase long-term disability
("LTD") benefits in accordance with the terms of the SPD.
Background. The plaintiff had been receiving LTD benefits
under his employer's disability insurance plan and believed that he
was entitled to a 7% per year cost-of-living adjustment as described
in the plan and the SPD. Accordingly, the plaintiff requested that the
LTD insurer increase in his benefits. In response, the LTD insurer
denied this request, and the plaintiff sued his employer and the
insurer for failure to pay his full benefits and for breach of
The lower court granted the
defendants' request for summary judgment and dismissed the case,
finding that the terms of the LTD plan did not provide for the 7%
annual increase sought by the plaintiff and that the plaintiff's
request for equitable relief was not warranted. The plaintiff
appealed this decision to the Sixth Circuit.
Sixth Circuit. The Sixth Circuit ruled that the employer had
"breached its fiduciary duty by issuing a summary plan
description that did not accurately reflect the terms of the
plan." Thus, the court ruled that the employer (i) functioned as
an ERISA fiduciary when it prepared and furnished the LTD plan's SPD
to participants, and (ii) breached its fiduciary duty by furnishing
the participant with a misleading SPD.
Next, the court confirmed
that the insurer had a fiduciary duty to the plaintiff. Accordingly,
the court ruled that the insurer had breached its fiduciary duty by
interpreting the plan in a manner that served its own financial
interests and was contrary to the representations made in the SPD.
Based on these breaches of
fiduciary duty, the Sixth Circuit reversed the lower court's decision
and remanded the case to the lower court where the plaintiff is
entitled to seek appropriate equitable relief.
Action Steps for
Employers. As demonstrated in Stiso,
inaccurate SPDs can lead to unexpected liabilities for employers.
Therefore, it is critical that employers review their plans' SPDs to
ensure that they include accurate descriptions of covered benefits
and any exclusions of coverage.