Employer’s Failure to Provide Departing Employee Forms to Request Distribution Was a Breach of Fiduciary Duty

Employees in the Chicago area who participate in an employer-sponsored 401(k) or profit sharing plan almost never have to ask any questions about how to make contributions to the plan. Upon commencing employment, the employer provides you with paperwork including election forms that will designate how much of your salary you wish to defer into the plan. Most of these types of retirement plans, though, provide that if you leave that particular employer, you can either leave the money in that plan, or request a distribution. The plans typically provide a procedure for requesting a distribution. It is not usually as simple as telling Human Resources you want your account balance out. There will typically be at least one form you must fill out to properly make the request under the terms of the plan. But the question arises: where do you get the form? The answer is that the employer must provide it to you, and a failure to do so could result in the employer’s liability for breach of fiduciary duty. Such was the case in Kujanek v. Houston Poly Bag I Ltd., 658 F.3d 483 (5th Cir. Sept. 27, 2011).

Mr. Kujanek left his employer and communicated his intent to take a distribution from the plan. The employer would not distribute the funds, because a distribution required completing a request for distribution form, but the employer would not give Kujanek the form. He contacted the plan’s third party administrator to request the form. The administrator contacted the employer, but the employer still would not provide the form. In the meantime, the securities in which Mr. Kujanek’s account was invested significantly dropped in value.

The United States Court of Appeals for the Fifth Circuit held that the employer breached its fiduciary duty, and was liable to Kujanek for the difference between the account balance when Kujanek tried to request a distribution, and the time when the distribution finally took place. The employer had a fiduciary duty to provide Kujanek with the forms and tools necessary to properly make his request for distribution, especially when it knew he was trying to make such a request.

If you have experienced problems obtaining a distribution from your plan, speak with an experienced ERISA lawyer today.