Moon v. Corteva has faced legal hurdles springing from two sources. The first is the trend of ERISA practice to focus on protecting plan sponsors from legal liability rather than ensuring that plan participants have the information they need to make informed financial decisions. The second is the legal deference given by ERISA court decisions to administrative procedural decisions. Nonetheless, the Delaware District Court has now found that Moon has made a plausible argument that the company’s actions violated ERISA and that he, therefore, deserves his day in court.
Confusion and misleading communications
Mr. Moon worked for DuPont from 1979 to 1999, during which time he participated in the DuPont Pension and Retirement Plan. The Plan is a defined benefit plan, which promises to pay a fixed monthly annuity for life beginning at normal retirement age, which was age 65. Moon turned 65 in 2017.
However, under an exception to the general rule, certain participants like Moon whose employment was involuntarily terminated, were eligible to receive unreduced monthly retirement benefits beginning earlier than age 65. In fact, Mr. Moon was eligible to begin receiving his full monthly pension as early as July 1, 2010, when he was 58.
The seven years makes a difference because the lost payments cannot be recouped under a defined benefit plan. Moon estimates that the mistake cost him $135,492. The Complaint alleges that thousands of other employees may be similarly affected.
The only notice that Moon received about his earlier eligibility date was in 1999, at the time of his termination. Even then, the information was cryptic, noting only “Earliest Unreduced BCD – 7/1/2010.” There was no further explanation, and all subsequent communications referred to the 2017 date. In fact, he only found out about his earlier eligibility date from the Social Security Administration. Even SSA had the date wrong, though, referring to 2012.
Followed by stonewalling
Mr. Moon appealed to the Retirement Plan’s Benefit Determination Review Team, seeking payment of the lost funds. The Committee denied his appeal. He then took the next administrative step, appealing to the DuPont Benefit Appeals Committee, which similarly denied his appeal, claiming that he had not applied for his full retirement benefit in a timely way.
As an aside with intriguing implications, DuPont underwent a significant re-organization during the mid-twenty-teens. In 2018, the re-formed company spun off all the pension plan liabilities and substantial litigation costs (including Mr. Moon’s claim) to a new subsidiary, named Corteva, Inc. The assets of the company, however, went to another new subsidiary, named DuPont de Nemours, Inc., but often shorthanded for clarity’s sake as New DuPont. One subsidiary got the money, the other got the debts. The pension debts have been estimated to be as high as $19 billion. This re-organization has been the subject of other lawsuits.
It was against this background that Mr. Moon filed this lawsuit in 2019, initially claiming violations of ERISA’s vesting rules and breaches of fiduciary duty. Corteva filed a motion to dismiss, which the Delaware District Court granted. The Court permitted Mr. Moon to amend his Complaint in order to clarify what claims were being asserted and what statutory or other authority formed the basis for them. The District Court’s latest decision suggests that it is now satisfied that a sufficient basis for his claims has been established.
The thorny problem of ERISA participant communications
ERISA establishes rigorous reporting and disclosure requirements. The emphasis is on completeness, accuracy, and timing. The goal of many ERISA practitioners is to protect plan sponsors from potential liability.
Readability is not necessarily a priority. Participant communications can be turgid, to say the least. This is a particularly acute problem for participants who are not financially sophisticated, and it is even worse for defined benefit plans, where understanding the amount of a monthly annuity may depend on some rudimentary understanding of actuarial factors.
The problem has long been recognized. In 2017, the Pension Right’s Center’s statement before the ERISA Advisory Council noted that:
“ERISA’s disclosure scheme is designed to inform participants and beneficiaries of their rights and obligations under their retirement plans. Additionally, some required disclosures are intended to enable participants and beneficiaries to monitor their plans so that their earned benefits will be paid upon retirement. Unfortunately, and all too often, plan disclosures to participants are confusing and written in technical language that is difficult for participants to understand.”
The testimony noted that similar warnings had been issued in 2009 and 2005.
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The other issue is the great deference that courts generally give to the decisions of plan administrative committees. The standard, as set out by the Supreme Court in Firestone Tire & Rubber Co. v. Bruch, is that an ERISA plan administrator with discretionary authority to interpret a plan is entitled to deference in exercising that discretion. It is very difficult to challenge a benefits denial unless an administrator can be shown to have abused that power. This may, ultimately, be the bigger hurdle for Mr. Moon’s claim against DuPont.