Employers are often surprised to learn they are liable for ERISA statutory penalties associated with participant document requests even though they have retained an insurance company or TPA to administer their ERISA welfare benefits plans. Generally, only the Plan Administrator, as defined by ERISA, can be penalized for failure to respond to document requests, and, almost always, the Plan Administrator is the employer/plan sponsor.

What if the document sought by a plaintiff was not prepared or maintained by the employer, but is a proprietary internal document created by the plan’s insurer or TPA? Is an employer liable for ERISA penalties if the insurer or administrator refuses to produce such a document?

In one case, a claims administrator initially denied the plaintiff’s claim for speech therapy benefits, relying upon certain internal guidelines. After the claims administrator refused the plaintiff’s requests for copies of the guidelines, she went to the employer for this information. However, the claims administrator also refused to provide this information to the employer. Almost a year later, the claims administrator reversed its decision and paid the claim.

Even though the claim was paid, the plaintiff then sued the employer for failure to provide the internal guidelines and other documents within 30 days of the plaintiff’s request. After seven years of litigation, including appeals, the employer was ultimately penalized almost $10,000 plus $40,000 towards the plaintiff’s legal expenses. Although the employer had made many efforts to assist the plaintiff, the court found that the employer “could have done more” to assist the plaintiff in obtaining the guidelines.

Employers and insurance brokers must recognize that insurers or third-party administrators are rarely responsible for basic legal and fiduciary responsibilities of the Plan Administrator under ERISA, such as responding to document requests. The lessons—full disclosure is usually best and always respond to document requests in a timely fashion. Read more.