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Appellate Court Rules That Lower Court Improperly Placed Burden On Pension Claimant To Produce Documents That Should Have Been Part Of The Pension Plan's Records

Pension plans are designed to be long-term such that participants steadily accrue benefits over their period of employment with the plan sponsor and any participating employer. As a result, records of participants' employment history and benefit accruals may span many years. Participants typically do not maintain these records themselves. Rather, these records are maintained (or should be maintained) by the plan administrator. But what are the consequences if the plan administrator fails to maintain such records?ERISA-Attorney_Man Carrying Large Rock on Back_Depositphotos_126376800_m-2015.jpg

All too often I receive telephone calls from individuals who tell me they worked for a company for 10, 15, 20 or more years, but were denied their pension because the plan administrator claims to not have the relevant employment records. What should they do? If they have objective evidence supporting their claim that they worked for the sponsoring employer or a participating company for a sufficient period to be vested in their pension, but lack full records of their employment history, they should sue, offer their objective evidence to the court, and cite the following case where the Court of Appeals held that plan administrators, not pension plan participants, have the burden of maintaining records showing which companies participate in the plan, whether the claimant worked for any of those companies, and the claimant's work history with each such company. Estate of Barton v. ADT Sec. Servs. Pension Plan, 820 F.3d 1060 (9th Cir. 2016).

In Barton, Bruce Barton worked for American District Telegraph (ADT) or an ADT affiliate from November 1967 until September 1986 when he resigned. During this period, Barton received information that he was a participant in an ADT sponsored pension plan.

In 2010, Barton attained age 65 and contacted the plan administrator (PA) about receiving his pension benefits. In response, the PA informed Barton that it could not find any information about his employment with ADT. Although Barton provided documentation of his employment with ADT affiliates, he was told that the documentation did not establish that he earned the requisite 10 years of continuous service with ADT or a participating ADT affiliate to qualify for a pension.

Barton then filed a formal claim for his pension with the plan's Benefits Committee, along with a plethora of documents establishing that he worked for ADT or an ADT affiliate from 1967 until 1986, including (i) a November 1977 letter from the President of ADT on ADT letterhead, congratulating Barton on his completion of ten years of service with ADT; (ii) copies of key cards and identification cards issued by ADT or an ADT affiliate, (iii) W-2 statements from 1980-1983 and 1986, listing ADT as Barton's employer and showing an X mark in the "Pension Plan" box; (iv) pay stubs from 1981 and 1985 listing ADT at the bottom; (v) ADT personnel data from 1984, 1985, and 1986 showing Barton's annual salary and raises; (vi) Social Security Administration documents summarizing ADT's FICA tax withholdings from Barton's wages from 1968-1980; (vii) Barton's September 11, 1986 resignation letter on ADT letterhead; (viii) a September 12, 1986 memorandum on ADT letterhead, confirming that ADT had received back from Barton a company credit card, tools, and company truck; and (ix) Barton's September 12, 1986 Exit Interview Questionnaire, listing his date of employment with ADT as November 10, 1967.

Notwithstanding Barton's considerable evidence that he worked for ADT or an ADT affiliate from November 1967 until September 1986, the Benefits Committee denied his claim on the grounds that (i) there were no plan records indicating that he had participated in the plan, and (ii) it was unclear from Barton's documents that he had earned the requisite 10 years of continuous service with ADT or a participating ADT affiliate to be vested in a pension. Barton responded by requesting plan records relating to his claim and appealing the Benefits Committee's denial decision. He included in his appeal additional FICA records, broken down quarterly from 1967-1977 when he was an hourly employee and annually from 1978-1986 when he was a salaried employee, all showing FICA deductions from his wages by ADT or an ADT affiliate. However, the Benefits Committee denied Barton's appeal, reasoning that Barton had not documented that he had earned the requisite 10 years of continuous service with ADT or a participating ADT affiliate. In other words, because Barton was unable to document that he worked the requisite hours for each of the nearly twenty years he was employed by ADT or one of its affiliates, he could not prove he was entitled to a pension.

Having exhausted his administrative remedies under the plan, Barton sued the plan, the PA, and Tyco International [Tyco assumed sponsorship of the plan in 1997] in federal court for his pension. Following a bench trial on Barton's claim, the district court ruled that, because Barton was the plaintiff, he had the burden of proving his claim, but he had not proved he worked the requisite 10 years of continuous service with ADT or a participating ADT affiliate to be eligible for a pension under the plan. Therefore, the district court (i) ruled that the Benefits Committee did not act arbitrarily and capriciously in denying Barton's claim, and (ii) granted a judgment in favor of the defendants.

The Ninth Circuit Court of Appeals reversed, reasoning that the federal district court had incorrectly placed the burden of proof on Barton for matters that were within defendants' control, specifically whether the ADT affiliates for whom Barton worked participated in the plan, and whether Barton worked the requisite hours each year for participating ADT affiliates to establish 10 years of continuous service under the plan. The Appeals Court explained that defendants were in a far better position than Barton to ascertain these matters since they acknowledged having access to the pension records passed on by ADT, adding that it was unreasonable to require Barton to prove his hours over a course of two decades, especially since he was not warned at the start of his career that he needed to retain a log of his hours to obtain pension benefits a generation or two later.

Accordingly, the Appeals Court held that, where a claimant like Barton has produced objective evidence that he is entitled to a pension, but has no means to confirm the claim except through information in the defendant's control, the burden then shifts to the defendant to produce the requisite information. Because Barton had produced objective evidence that he worked for ADT or an ADT affiliate from 1967 until 1986, Barton was not required to produce all of his pay stubs for that period to establish that he earned 10 years of continuous service with ADT or a participating ADT affiliate. Rather, it was up to defendants to produce documentation as to which ADT companies participated in the plan and, for the participating ADT companies where Barton worked, Barton's payroll records. The Appeals Court then sent the case back to the district court to reconsider Barton's claim under this burden-shifting criteria.

Back in the district court, the parties engaged in settlement negotiations, but those negotiations did not result in a settlement. The case is now set for trial in October of this year (2017). Based on my review of the record, and given the analysis and rulings by the Court of Appeals, my bet is that BARTON WILL BE THE ULTIMATE VICTOR.

The lessons to be learned from this case are that (i) plan administrators have a duty to maintain records that bear on an individual's eligibility (or not) for a pension under the plan; and (ii) therefore, they may not deny an individual's pension claim on the ground that the plan does not have those records, especially where it would be unreasonable to expect the claimant to have them and the claimant has produced other objective evidence in support of the claim.

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