A retirement plan manager breached its fiduciary duty under ERISA by increasing without notice to the plan's participants their medical insurance premiums, the United States Court of Appeals ruled in Orth v. Wisconsin State Employees Union, No. 07-2778 (7th Cir. October 22, 2008). When the plaintiff, Orth, retired a collective bargaining agreement provision required the plan to apply the monetary value of his accrued and unused sick leave toward his portion (10%) of his medical insurance premium. However, the plan manager without notifying Orth or other retirees increased his premium portion to 100%, a practice that Orth learned of when the plan manager told him to send more money to pay his medical insurance premium. This court ruled that this change breached the plan manager's fiduciary duty because ERISA required the plan manager to notify the retirees of any changes to their plan. Also, the court noted that ERISA requires that "a plan's participants and beneficiaries must be notified in writing of all modifications to the plan." Therefore, the court concluded that the change was "doubly unlawful -- as unwritten and as secret."
The court also ruled that Orth was properly awarded restoration of his accrued sick leave benefits. In addition, the court upheld an award of attorneys' fees to Orth, asserting that the "use of deceptive conduct toward the retired employees as a basis for trying to duck liability was shabby." And the court added that "one purpose of allowing an award of attorneys' fees to a prevailing plaintiff is to disable defendants from inflicting with impunity small losses on the people whom they wrong."
