The U.S. Court of Appeals for the Third Circuit joins the Second, Seventh, Eighth, Ninth, and Tenth Circuits in declining to impose liability on alleged de facto plan administrators.  Under Section 502(c) of Employee Retirement Income Security Act (ERISA), a plan administrator may be liable and subject to penalties for failing to comply with a participant’s request for information which the administrator must provide within 30-days from the request.  The Third Circuit addressed whether a participant could sue a “de facto plan administrator” for failing to provide information timely.

Under ERISA, “administrator” is defined as “the person specifically so designated by the terms of the instrument under which the plan is operated.”  In this case, the plan administrator was the board of trustees, who delegated to its executive pension director (“director”) the authority to process and approve all non-disputed applications for benefits and to begin timely payment of benefits.  The board, however, specifically noted that all actions and decisions by the director were subject to board ratification.

The participant claimed that the director’s failure to respond adequately to document requests violated Section 502(c) of ERISA, arguing that the director appeared to function as the plan administrator in responding to questions, providing summary plan descriptions, and most notably, never disavowing the plan administrator title.

After acknowledging the weight of authority from its sister courts denying the de facto theory, the Third Circuit rejected the de facto administrator theory for three reasons.  First, the Supreme Court advises courts to avoid reading remedies into ERISA’s carefully crafted enforcement statute.  Second, as a penal provision, Section 502(c) of ERISA should be leniently and narrowly construed.  Finally, the Third Circuit noted that it has consistently construed this statutory provision narrowly and that it saw no reason to depart from that approach.  The Third Circuit thus concluded that it “must restrict application of the title ‘administrator’ to those who fit the statutory definition and not stretch the term to authorize penalties against others whom a disappointed participant might like to reach.”

Although most circuits align with the Third, the de facto administrator theory remains jurisdictionally sensitive, as the First and Eleventh Circuits have accepted the theory in some capacity.

The case is:  Bergamatto v. Bd. of Trs. of the Nysa-Ila Pension Fund, No. 18-2811 (3d Cir. Aug. 6, 2019).