Blogging Employee Benefits

August 8, 2006

Deference Denied for Unnecessary Multiple Valuations

Filed under: Distributions, Litigation — Fuguerre @ 10:34 pm

A money purchase plan administrator’s decisions to make multiple revaluations of plan assets for purposes of determining a distribution payout were not entitled to deference, according to a 1st Circuit ruling affirming the district court. [Janeiro v. Urological Surgery Professional Association, 05-2150]

Plan terms provided for annual valuation of plan assets each December 31, but gave the plan administrator discretion to construe plan terms and make benefits decisions, explicitly authorizing “an extraordinary adjustment date whenever market values of underlying assets have changed so much that it would be inequitable to do otherwise.” Bitter personal acrimony between the plan’s trustee and his departing former partner led to 5 successive revaluations of plan assets, eventually basing distribution of plan benefits at depressed market values of June 30, 2002, instead of the normal valuation date of December 31, 2000, that ought to have been used. Significant stuctural conflict of interest was present in that the distribution stood to deplete the plan of 70% of its assets, of which 92% would be in the trustee’s own account; but the district court looked further, finding additional evidence of conflict sufficient to abandon the deferential standard of review. Reviewing the benefit decision de novo, the district court found a fiduciary violation in the plan’s failure to timely segregate and liquidate plan assets sufficient to make the distribution, holding that the departing employee was entitled to a distribution valued as of 12/31/2000.


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