The Fourth Circuit held that an employer was not acting as an ERISA fiduciary when it accepted life insurance premiums from a plan participant without informing him that he no longer was eligible for the coverage. The court concluded that the employer’s actions were not discretionary functions with respect to the management, assets, or administration of the life insurance plan, and that the plan documents did not confer fiduciary status on the employer.
Moon was employed full-time by BWX Technologies and its predecessor corporations from 1969 until 2005. In June 2005, Moon was unable to continue working due to a severe heart condition. He received short-term disability benefits through November 2005. He later applied for long-term disability benefits, and his application was approved in December 2005. As of that date, Moon no longer was employed by BWX.
Sometime during his employment in 2005, Moon enrolled in various employee benefit programs offered by BWX, including a group life insurance policy issued by MetLife providing coverage of $200,000. The MetLife coverage was to become effective January 1, 2006. In a confirmation statement issued in November 2005, several days before Moon went on long-term disability, BWX identified his coverage as “Employee Life Insurance” under the heading “Plan Name.”
In January 2006, BWX printed a second benefit confirmation statement, confirming that Moon had selected certain employee benefits effective in 2006, including a $200,000 life insurance benefit. The 2006 confirmation statement did not indicate that Moon no longer was an employee of BWX.
Moon died in November 2006. The life insurance premium payments were in arrears at the time of his death. Eleven days after Moon’s death, his beneficiary wrote to BWX enclosing a check in payment of the entire balance due. She then made a claim directly to BWX, requesting payment of the $200,000 life insurance benefit.
BWX denied the claim, stating that under the terms of the plan Moon was no longer eligible for group life insurance coverage when he ceased active employment as a result of permanent disability. Moon could have elected to convert his group life insurance to an individual policy, in which case he would have been required to pay premiums directly to MetLife, but he did not do so.
The beneficiary alleged that, in reliance on the 2006 confirmation statement, Moon and his family paid life insurance premiums directly to BWX, and that BWX accepted the payments without objection. According to the complaint, Moon “reasonably believed that BWX would provide the benefits including life insurance benefits” if he paid the premiums to BWX.
BWX moved to dismiss the plaintiff’s equitable estoppel and breach of fiduciary duty claims because it was not acting as a “fiduciary,” as that term is defined in ERISA. The district court agreed, noting that a person is an ERISA fiduciary only to the extent that he exercises discretionary authority over the plan. Moon v. BXW Techs., Inc., 956 F. Supp. 2d 711, 717 (W.D. Va. 2013).
The district court then concluded that the alleged wrongdoing by BWX did not involve discretionary acts. Therefore, the district court held that the plaintiff’s equitable estoppel and breach of fiduciary duty claims failed, because BWX was not acting as an ERISA fiduciary at the time of the alleged wrongful conduct.
In affirming, the Fourth Circuit wrote that “[t]o state a claim for breach of fiduciary duty under ERISA, the threshold question is whether the plaintiff has sufficiently alleged that the defendant was a ‘fiduciary,’” as defined by 29 U.S.C. § 1002(21)(A). The Fourth Circuit has observed that an ERISA fiduciary is “any individual who de facto performs specified discretionary functions with respect to the management, assets, or administration of a plan.” Custer v. Sweeney, 89 F.2d 1156, 1161 (4th Cir. 1996). Simply because an employer is an ERISA plan sponsor does not automatically make the employer a plan fiduciary.
Although the plaintiff argued that BWX was a “de facto” ERISA fiduciary, the court held that because the definition of an ERISA fiduciary “is couched in terms of functional control and authority over the plan,” it was required to “examine the conduct at issue when determining whether an individual is an ERISA fiduciary.” BWX’s acceptance of Moon’s premiums during 2006, as well as its failure to notify Moon that he no longer was eligible for life insurance coverage under the MetLife plan, were not discretionary functions with respect to management, assets, or administration of the life insurance plan, but were more akin to the collection of contributions.
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