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Denial of Tuition Benefits Did Not Breach Fiduciary Duties Under Early Retirement Plan



Wasserstein v. Univ. of Chicago, 2018 WL 3474543 (N.D. Ill. 2018)

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A retired university professor sued his former employer alleging the university had breached its fiduciary duty in administering its early retirement incentive plan. Under that plan, the professor had signed an irrevocable agreement to retire early in exchange for a bonus and waived health insurance premiums. An FAQ document summarizing the early retirement incentive plan also stated that faculty members retiring at or after age 65 with ten or more years of tenured service would remain eligible for the university’s educational assistance plan, which provided scholarships to faculty members’ children. Nearly three years after his retirement, the professor learned that, between the date he signed an irrevocable agreement to retire and the date his retirement became effective, the university had changed the educational assistance plan to require 15 years of continuous service rather than ten. When the university informed the professor that he was not eligible for tuition benefits because he lacked 15 years of service, the professor sued, claiming that the university misled him about the retirement incentive plan before he accepted retirement, and failed to notify him of changes to the eligibility requirements for the educational assistance plan.

The court ruled for the university, finding that the FAQ document clearly disclosed that it was only a summary description of the early retirement incentive plan and directed readers to further information and resources (including copies of the controlling plan documents for both the early retirement incentive plan and the educational assistance plan). The professor had not obtained a copy of the retirement incentive plan nor obtained available early retirement counseling before signing his early retirement agreement, and the court found his reliance solely on the FAQs unreasonable considering the numerous disclaimers and references to additional resources. The court further held that the university had no fiduciary duty to notify the professor of changes to the FAQs. Rather, the retirement incentive plan only required notification in the event of material changes to the plan itself—of which there were none. Although the university did amend its educational assistance plan, the court found it had no duty to notify retirement incentive plan participants of a change to the separate educational assistance plan, particularly when that plan allowed for termination or amendment at any time in the university’s discretion.

EBIA Comment: If this professor had understood that tuition benefits were part of a separate plan that could be changed at will, he might have elected to work a few more years to ensure tuition benefits for his son. His misunderstanding was determined not to be the result of a fiduciary breach, however, because the university’s fiduciary duties related only to the retirement incentive plan, and the communications about that particular plan were accurate. Moreover, while the FAQ document did not expressly state that the educational assistance benefit was in a separate plan, the professor was offered the information necessary to correct his misunderstanding. To avoid similar litigation, plan administrators should consider the scope of their communications, and take extra care when referencing the provisions of other plans. For more information, see EBIA’s Fringe Benefits manual at Section X.A.1.b (“Qualified Tuition Reductions”) and EBIA’s ERISA Compliance manual at Section XXIV.L (“Conflicts Between SPD/SMM and Plan Document or Insurance Contract”).

Contributing Editors: EBIA Staff.

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