Federal District Court Provides Important (and Employer-Friendly) Reminders for ERISA Plan Document Requests

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Most employers sponsoring ERISA-covered benefit plans, like major medical health plans, are familiar with ERISA’s requirement that plan administrators provide certain plan documents to a participant or beneficiary upon request. More specifically, ERISA Section 104(b)(4) requires plan administrators provide, upon request, the latest summary plan description, annual report, final Form 5500 (if any), any underlying trust agreement, related bargaining agreement, and/or any contract or other instrument under which the plan is established or operated. This requirement has been interpreted to cover current plan documents and valid amendments as well as historical, inoperative plan documents when there is a question or issue to reliance on such inoperative documents related to a benefits decision. For this purpose, a “participant” generally includes an employee or former employee who is or may become eligible to receive a benefit under a plan. Similarly, a “beneficiary” includes an individual who is designated by a participant and who is or may become entitled to benefits under a plan. Participants and beneficiaries can make a request for documents directly or through a non-participant third party, like an attorney, if he or she has authorized the disclosure.

A plan administrator must provide such documents within 30 days of receiving a written request unless the failure or refusal is due to something outside of the administrator’s control. If a plan administrator does not timely provide such documents, ERISA Section 502(c)(1) allows a participant or beneficiary to sue a plan administrator and allows courts to impose monetary penalties of up to $110 per day (beginning on the date of the failure or refusal). The intent behind this requirement and the potential penalties is make it easier for participants and beneficiaries to understand how the plan works, including their eligibility for benefits and how to obtain benefits.  As such, in considering whether such penalties should be assessed, courts tend to look at whether there was intentional misconduct by the plan administrator, the length of the delay, and the number of individuals affected and the number of requests made. While this determination is dependent on the facts and circumstances of each individual case, a recent federal district court case shed important light on how a plan administrator may respond to broad document requests and avoid maximum penalties for failing to respond to an ERISA document request.

In Zavislak v. Netflix, Inc., 2024 WL 382448 (N.D. Cal. January 31, 2024), a federal district court in California addressed whether Netflix, as plan sponsor and administrator, should be assessed statutory penalties under ERISA Section 502(c)(1), after it failed to timely provide health plan documents upon request by a plan beneficiary.

In this case, the plaintiff, a covered beneficiary in the employer-sponsored health plan, requested various health plan documents, including the formal plan document, third-party administration agreement, and any other documents related to making benefit determinations under the plan.  The plaintiff made this request to the company’s benefits manager in January 2021; however, the request was made during the COVID-19 pandemic when employees were working remotely, and the plaintiff did not receive a response. In February 2021, the plaintiff sent an additional letter requesting the documents. Thereafter, Netflix’s in-house counsel responded to the plaintiff and began to provide responsive documents. Based on references in the documents received, the plaintiff then requested certain administrative services agreements (“ASAs”) between the plan’s third-party administrator and claims administrators; however, Netflix refused to provide the additional documents. Subsequently, the plaintiff filed suit against Netflix and requested the maximum penalties under ERISA Section 502(c)(1) of $110 per day for the failure to provide requested plan documents. Netflix contended that the plaintiff was not entitled to the ASAs under ERISA and that it should not be assessed penalties for its late disclosure of other plan documents pursuant to the Department of Labor’s suspension of various ERISA-plan deadlines related to the COVID-19.

First, the Court dismissed the plaintiff’s claim that Netflix failed to provide the ASAs under ERISA 104(b)(4). The Court held that Netflix did not fail to respond to the plaintiff’s request for the ASAs as such documents are not required to be provided under ERISA Section 104(b)(4). The Court explained that while ERISA Section 104(b)(4) includes “contracts”, the intent behind this disclosure requirement is to capture contracts or other documents that may inform a participant or beneficiary of how he or she can receive benefits under a plan. Per the Court, contracts or documents that only relate to the operation of a plan, like the ASAs between the employer, third-party administrator, and claims administrators, and do not govern the relationship between the employer and participant are beyond the scope of the disclosure requirement under ERISA 104(b)(4). The Court rejected the plaintiff’s argument that the ASAs should be disclosed because they contain claims and appeal information and explained that this was not necessary as other documents already provided to the plaintiff contained this same information.

In response to the plaintiff’s request that the Court assess the maximum penalty under ERISA 502(c)(1) of $110 per day against Netflix (related to its failure to timely provide requested documents other than the ASAs), the Court declined and instead only assessed $15 per day, beginning on the date of the plaintiff’s initial request through the date that Netflix eventually provided all requested documents (i.e., 431 days), for a total of $6,465. The Court explained that the assessment of penalties, including the amount, is within the Court’s discretion. The Court reasoned that while Netflix did not provide the requested documents within 30 days of the plaintiff’s initial request, it did respond promptly after the plaintiff’s second request and did not act in bad faith in light of the COVID-19 pandemic and the related deadline suspensions. The Court, however, still assessed a minimum penalty of $15 per day consistent with the aims of ERISA to protect plan participants and beneficiaries.

This decision provides employer plan sponsors and administrators with some important reminders regarding ERISA document requests. In addition to reminding employers of the importance of having internal processes and procedures for timely responding to such requests, it reminds employers that ERISA’s disclosure requirement is not limitless. As the Court in Zavislak showed us, participants and beneficiaries are not entitled to any and all plan-related documents; rather, they are generally entitled to those documents that inform participants and beneficiaries about their eligibility for and entitlement to benefits under an ERISA-covered benefit plan. Employers should review such requests closely to fully understand the parameters of the request and determine exactly what documents may be responsive. While it may be easier to produce a broad range of documents instead of taking the time to carve out nonresponsive documents, providing documents that may contain sensitive, irrelevant, or potentially harmful information creates unnecessary risks for the employer and its partners. This case also reminds employers that the courts have a wide range of discretion in assessing penalties. While the Court in Zavislak assessed penalties on the low-end of the spectrum, many courts take the opposite approach and do not hesitate to assess the maximum penalty of $110 per day.  The risk of any penalties should encourage employers to evaluate their processes and procedures and have a plan on how to timely respond to these requests.