Disney Case Shows Pitfalls Of Overlooking Pension Plan Descriptions

March 31--How much effort should a company make to inform employees how their personal decisions could affect their benefits?

This week, a widow learned she lost an appeal to the Walt Disney Co. over that issue.

Mary Schmitt's husband, Doug Trucks, was a 28-year Disney employee who worked in facilities project management for its hotels. He died in 2014 after a six-year fight with cancer, during which time Schmitt said the couple talked with human resources and providers many times about Trucks' benefits. Still, Schmitt and Trucks never realized that if he didn't retire before he died, she would lose thousands of dollars annually in survivor's pension payments.

That information was provided in the pension's summary plan description that was mailed to the couple in 2012 and was available online. Schmitt argued Disney and its contractors should have pointed it out verbally or more prominently online. Disney said in a letter rejecting her appeal its pension subcommittee determined "the terms of the Plan and its summary plan description were clear and unequivocal."

Pension experts say employees at other companies have inadvertently cut their benefits by not fully understanding requirements and that Schmitt's case points to the importance of carefully studying summary plan descriptions, provided to give overviews of benefits.

It is not uncommon for workers to inadvertently lose out on benefits, said Emily Spreiser, legal program director with the nonprofit Pension Rights Center. For instance, she said, there have been cases in which workers at other companies received dramatically reduced pensions because they retired a few days shy of the time they'd need to work to earn more. In court disputes, cases have generally "not gone well" for workers if summary plan descriptions disclosed the information, Spreiser said.

"Just because something is unfair or maybe not nice doesn't necessarily mean it's in violation of the law," she said.

However, providing information in plan descriptions alone hasn't always been enough, said Jay Van Heyde, an attorney with Dean Mead. For example, in 2000 an appeals court ruled Kmart Corp. breached its fiduciary duty by not giving timely information to a former employee's girlfriend about converting his life-insurance coverage. The court ruled against Kmart despite evidence that a summary plan description described the conversion process.

"Just because it is in the summary plan description, these courts didn't seem to care," Van Heyde said.

Cases' strength can often hinge on details of conversations with employers and plan administrators, he said.

In its rejection letter, Disney told Schmitt its pension subcommittee reviewed summaries of conversations with its benefits center.

"We tried to do everything right," said Schmitt, also a longtime former employee who worked in finance at Walt Disney World and at Disney Vacation Club. "We tried to follow the rules. We were good soldiers, and they had every opportunity to disclose this."

By remaining employed, Trucks was eligible for health and life insurance. Schmitt says the increased pension amount, about $1,000 monthly, would have outweighed those benefits.

If he did that, Trucks could have chosen a 100 percent joint and survivor annuity. Because he didn't, Schmitt could only receive an amount equivalent to a 50 percent joint and survivor annuity. The smaller benefit was described on page 42 of the 76-page summary plan description.

Earlier this month, Disney told the Orlando Sentinel the company's benefits committee would consider her appeal April 8. It then rescheduled the appeal for last week and denied her claim. Schmitt found out Tuesday.

Disney told Schmitt she can sue in federal court. Schmitt said she doesn't know if she will.

Spreiser said her group's suggestions for employees include notifying employers of changes that could affect pensions and getting promises from plan representatives in writing.

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