Court Opens Door for Disclosure of Investment Guidelines

An appeals court has opened the door for the requirement that an ERISA plan’s investment guidelines be disclosed to participants upon request.

The determination comes from the 5th U.S. Circuit Court of Appeals, as part of a case involving thousands of Verizon retirees who say they were involuntarily moved from Verizon’s main retirement plans into the pension plan of a now-defunct spinoff company, Idearc Inc. The retirees first made their case in a 2009 complaint, alleging more than 2,000 former Verizon employees were improperly switched post-retirement from the Verizon Communication Inc. pension plans into a new Idearc Inc. plan.

That compliant made its way first to a Texas district court, citing fiduciary violations under the Employee Retirement Income Security Act (ERISA) Sections 104(b)(4) and 404(a)(1), among others—where it was dismissed on summary judgment. This led to an appeal to the 5th Circuit, where the claims were also unsuccessful. However, in its recent ruling, the 5th Circuit made important clarifying statements about plan document disclosure requirements under the ERISA Sections cited by the plaintiffs.

In short, the 5th Circuit confirmed that ERISA Section 404(a)(1)’s fiduciary requirements may obligate at least responsive disclosures of relevant plan materials upon a specific request by a plan member, even if the documents are not indispensable operational instruments under which the plan is established. The text of recent the 5th Circuit decision also discusses important differences between disclosure requirements under Sections 104(b) and 404(a)—noting that most appellate courts have acknowledged that the former is narrower and the latter is broader in terms of the documentation and disclosure each may require from plan fiduciaries.

The initial complaint, granted class certification in 2011, accused Verizon of a wide list of fiduciary breaches, some related to a lack of disclosure and others to alleged violations of plan administration rules. These included failure to provide requested plan documents; breach of fiduciary duty for refusal to disclose pension related plan information; breach of fiduciary duty for failure to comply with pension plan document rules; unlawful refusal to make payment of Verizon pension plan benefits; and unlawful interference with retirees’ rights to receive Verizon retiree pension and welfare benefits.

The accusations arose after one of the lead plaintiffs in the case, in light of Idearc Inc.’s deteriorating financial condition circa 2009, submitted to both Verizon’s and Idearc’s employee benefits committees a letter purporting to make “classwide administrative claims” for benefits allegedly due under the Verizon plans. The letter made an ERISA request for plan documents containing information about the state of the plaintiffs’ pension plans. It also requested that the benefits committees rescind the involuntary transfer of the plaintiffs from Verizon’s to Idearc’s plans and that the plaintiffs be reinstated in Verizon’s plans.

Court documents show that on July 31, 2009, the Verizon Claims Review Unit (VCRU) issued a response which denied in full the plaintiffs’ individual and proposed class-wide administrative claims. On September 15, 2009, the plaintiffs submitted another letter to the Verizon Claims Review Committee (VCRC), constituting an appeal of the VCRU’s initial claim determination. Eventually the VCRC sent a letter to the plaintiffs’ counsel, dated January 12, 2010, indicating that the plan’s administrative committee had determined to deny the appeal.


Participants then filed their claims in the United States District Court Northern District of Texas Dallas Division. The court determined on summary judgment that the pension plan established at Idearc Inc. was created in a manner that complied with ERISA, and that no documentation rules had been violated, as had been claimed in a variety of ways by participants.

These specific claims were also ultimately unsuccessful on appeal to the 5th Circuit. In its opinion, the appellate addressed whether the defendants had violated ERISA Sections 104(b)(4) and 404(a)(1) by failing to provide certain documents.

The court noted that under ERISA Section 104(b)(4), plan administrators must, “upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.” The 5th Circuit noted there has been some difference in how broadly appellate courts have interpreted language under ERISA Sections 104(b)(4) and 404(a)(1).

For example, the 6th Circuit has adopted what appears to be a minority view, case documents show. In Bartling v. Fruehauf Corp., a company informed its employees of its pending sale and replaced a previous pension plan for its employees with a new plan. The original plan’s participants requested certain plan-related documents, some of which the company refused to provide. The participants sued, arguing that they were entitled, under Section 104(b)(4), to: (1) actuarial valuation reports; (2) portions of the purchase agreement relating to pension and welfare benefits; and (3) the calculation procedure used to compute benefits.

The 6th Circuit concluded on appeal that “because an actuarial valuation report is required for every third plan year, § 1023(d), these reports are indispensable to the operation of the plan.” The court further noted that “the purpose of ERISA’s disclosure requirements is to ensure that ‘the individual participant knows exactly where he stands with respect to the plan.’” Therefore, “all other things being equal, courts should favor disclosure where it would help participants understand their rights.”

The 6th Circuit also found that the plan administrator was required under Section 104(b)(4) to produce the calculation procedure for computing benefits, although the court did not provide any explanation as to why such documents fell under the 104(b)(1) catch-all provision. Finally, the court held that the plan administrator was not required to provide the purchase agreement, because it did not exist at the time that the original plan was terminated.

In another informative example cited by the 5th Circuit, Hughes Salaried Retirees Action Committee v. Administrator of the Hughes Non-Bargaining Retirement Plan, the 9th Circuit applied a slightly narrower construction of the catch-all clause, concluding that a plan was not required to produce, under Section 104(b)(4), a list of the names and addresses of all retired participants of the plan. The court rejected the participants’ argument that such a list was an instrument “under which the plan is established or operated” allegedly because the plan could not operate without it. According to the 9th Circuit, interpreting Section 104(b)(4) to require the disclosure of all documents that are “critical to the operation of the plan” lacks a limiting principle, and would even potentially mandate the disclosure of sensitive personal information about participants.

The majority of courts, however, have adopted an even stricter construction of the catch-all clause, concluding that it applies only to formal legal documents, the 5th Circuit noted. It sided with the majority of the circuits.

Under this result, the plaintiffs’ appeal in the Verizon/Idearc Inc. matter for access to the investment guidelines failed on appeal under Section 104(b)(4), due to the narrower definition of “instrument.” The 5th Circuit noted that the appellants “neither specifically pleaded that the guidelines are binding on the plans at issue here, nor attached to the complaint portions of the plans or guidelines indicating the guidelines’ mandatory effect. Because the guidelines are not alleged to be binding, they do not ‘define rights, duties, entitlements, or liabilities.’”

Plaintiffs in the Verizon/Idearc appeal also pointed to a Department of Labor (DOL) bulletin interpreting ERISA Section 404(a)(1)(D), which requires that “a fiduciary . . . discharge his duties with respect to a plan . . . in accordance with the documents and instruments governing the plan.” According to the DOL bulletin, “statements of investment policy issued by a named fiduciary authorized to appoint investment managers would be part of the ‘documents and instruments governing the plan.’”

As the 5th Circuit observes, Section 104(b)(4) concerns only “instruments under which the plan is established or operated,” while Section 404(a)(1) applies to “documents and instruments governing the plan.” Thus, the court said, the latter is broader than the former and may not necessarily be limited to formal legal documents. Given this wider application of Section 404(a)(1), the court said its precedent confirms that, in fact, Section 404(a)(1)’s fiduciary duty may obligate at least responsive disclosure of relevant plan materials upon a specific request by a plan member.

For this reason the appellate court ruled the Texas district court had erred in when it held that “ERISA section 404(a)(1) . . . does not create additional disclosure obligations beyond those found in ERISA section 104(b)(4).” In this case, however, the appellants’ claim for disclosure pursuant to Section 404(a)(1) is moot because they already received all requested relief—namely access to the investment guidelines originally sought in the 2009 complaint, along with other key documents. Although statutory damages may be available for a Section 404(a)(1) claim, the 5th Circuit explained that the appellants did not seek damages for this claim in the current case. 

“Having sought only production of the requested documents as a remedy for its Section 404(a)(1) claim, and conceding that they have received the requested documents, Appellants have therefore received all relief they sought for the alleged breach of fiduciary duty,” the court wrote in its opinion.

“Since the claim is moot, there is no need for us to resolve the tension, if any, in our case law regarding the extent of disclosure obligations under Section 404(a)(1),” the 5th Circuit concluded.

The spin-off of Idearc Inc. (which has since evolved into SuperMedia, Inc.) is described in detail in U.S. Bank National Association v. Verizon Communications, Inc