Employees and Retirees in Chicago alike frequently wonder what happens when a plan administrator misrepresents the pension benefits that employee or retiree would receive, such as what the annuity payment amount would be. There have been plenty of cases involving a misrepresentation by the plan sponsor or employer (e.g., Enron). But no case yet arising in Chicago has yet to extend the estoppel principle against a retirement plan itself. A recent case appeared to be the example where the Seventh Circuit Court of Appeals would answer the question: can an estoppel claim proceed against the plan. See Pearson v. Voith Paper Rolls, Inc., No. 08 C 114 (7th Cir. Aug. 25, 2011). However, the court found a way to dispose of the case without answering the question that needed answering.
In Pearson, Kenneth Pearson was nearing retirement from Voith Paper Rolls. Prior to his retirement, Pearson met with a Human Resources representative regarding retirement, and Pearson asked the representative to calculate his retirement benefits under the plan. The plan provided that a retiree could elect between either a lump sum distribution, or one of several different variations of annuities. Pearson had met the age and service for early retirement, but not for full retirement benefits. When the Human Resources representative calculated Pearson’s options, he entered the early retirement information into the lump sum distribution calculation, but not into the annuity calculations, thereby representing to Pearson artificially inflated annuity payments. Pearson elected one of the annuities, and after he retired, was informed his annuity payment would decrease.
Pearson raised claims of estoppel against the Plan. Faced with having to decide for the first time whether a claim of estoppel can proceed against a plan by a participant in the Seventh Circuit, the Court of Appeals declined to answer the question. The court held that even if it recognized such a claim against the plan, Pearson did not offer evidence of all the required elements, namely that the Plan intentionally misrepresented the benefit amount, or that Pearson relied on the misrepresentation to his detriment. The court thus affirmed the district court’s grant of summary judgment to the Plan.