One of ERISA’s primary purposes is to provide notice and disclosure of the terms of employee benefit plans. A recent case discussing some of the nooks and crannies of ERISA notice and disclosure requirements is Custer v. Murphy Oil USA
, ___ F.3d ___, 2007 U.S. App. LEXIS 23511 (5th Cir. 2007). The trial court ruled that changes Murphy Oil had made to its ERISA plan were properly communicated to its employees and granted summary judgment to the company. Custer, an employee, appealed and the U.S. Court of Appeals for the Fifth Circuit
reversed the trial court and remanded for further proceedings.
Michael Custer was injured in an accident at home and required significant medical treatment to deal with a herniated disk. His injuries prevented him from working and Murphy Oil, his employer, terminated his job. Custer read his ERISA plan documents. They assured him that, if he was disabled, he was entitled to medical benefits until he turned 65. It was not until many months after the accident that Custer was told by Murphy Oil that the company had amended the ERISA plan about a year before his accident and that he had no medical coverage after his COBRA benefits expired. This was a problem for Murphy because he had a significant time gap between that date and when he turned 65.
Murphy was surprised to hear about the amendment cutting back his medical benefits. He had no recollection of receiving any notice of the amendment and neither did the co-employees he spoke with.
ERISA requires that a summary of any material modifications to a benefits plan be sent to all plan participants and beneficiaries no later than 60 days after the date the change is adopted. 29 U.S.C. §1024(b)(1).
ERISA’s regulations require that plan administrators shall use “measures reasonably calculated to ensure actual receipt of the material” in giving notice of material modifications to benefit plans and that mailing satisfies that requirement.
The company’s internal records showed that, in fact, Murphy Oil management had properly voted on and approved the changes reducing the medical benefits for disabled employees before Custer's accident. But there was a question about whether notice of that change had ever been provided to the employees. Two individuals from the company testified that a letter informing employees and their dependents of the change was sent to all employees using the normal methods of mailing. Those employees went on to generally describe that mailing process. They also provided a list of employees to whom mailings were sent. Custer was on the list.
But the Fifth Circuit was troubled by the fact that two other individuals at the company who were actually responsible for addressing and mailing the envelopes provided no evidence that the notices were mailed and the company kept no specific records of what it had sent out. Moreover, the company had not presented any information regarding the day on which the notices were sent. In short, the Fifth Circuit felt that the individuals with the best knowledge of whether and when the notice of the change to the benefits plan were sent to the employees were silent about key facts.
On the other hand, in addition to his own testimony, Custer presented affidavits from four other shift supervisors, like himself, that they had never received the notices informing them of changes to the medical benefits plan. Three of the four testified that they routinely kept all mailings from the company and in going back and reviewing those documents, none of them found the mailings the company asserted had been sent out. Going further, they all testified that they regularly discussed amongst themselves and family members changes the company made to the benfits plan and had no recollection of the particular change that affected Custer until he told them about it after his accident.
Murphy Oil argued that the court should rule in its favor based on the “mailbox rule.” That principle of law states that where a party is legally obligated to send a notice, proof of timely mailing of a document establishes a rebuttable presumption that the document was received by the addressee.
However, the Fifth Circuit rejected that argument. The court ruled that the question was not whether Custer had actually received the notice but whether Murphy Oil had proven that it had sent the notices as required by ERISA. Custer had presented sufficient facts to create a genuine issue of material fact about whether Murphy Oil had utilized measures that were reasonably calculated to ensure that Custer actually received the notices. The court sent the case back for additional presentation of evidence on that issue.
The Fifth Circuit also raised the interesting question of what remedy was available to Custer if the court found that Murphy Oil did not carry its burden of proving that notice was sent to Custer and his co-employees. That issue will be left for the trial court to sort out.
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