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Employer must take steps to ensure benefit change notice was sent: Court

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NEW ORLEANS—An employer must present evidence that workers were informed about a benefits plan change to prove the employer complied with the Employee Retirement Income Security Act's reporting and disclosure requirements, a federal court of appeals has ruled.

But no such proof was provided in Michael Custer vs. Murphy Oil USA Inc., the 5th U.S. Circuit Court of Appeals ruled in its July 24 decision, which overturned a lower court's June 2006 dismissal of the case.

According to the decision, Mr. Custer suffered ruptured discs in his neck in a December 2003 accident in his home and was unable to return to work. He was told by his employer, El Dorado, Ark.-based Murphy Oil, that his employment would be terminated because he was totally disabled.

Furthermore, Mr. Custer was told that, under a plan modification effective in January 2003, he no would longer qualify for coverage under the company's self-insured group insurance plan. Under the plan in effect prior to 2003, Mr. Custer would have been covered until he turned 65.

Murphy Oil said it mailed a written notice in December 2002 and again in March 2003 to all active employees notifying them of that and other changes to the plan.

Mr. Custer, though, claimed he did not receive either document, the opinion stated. He filed suit against the company, seeking a declaratory judgment and damages under the pre-2003 version of the plan.

No evidence

Under U.S. Department of Labor regulations that enforce ERISA, administrators must "use measures reasonably calculated to ensure actual receipt of the material" describing plan modifications.

However, "the summary judgment record provides no direct evidence that the December 2002 notices were mailed, such as business records, a signed receipt from certified mail, or a post-marked envelope. Murphy does not even provide a sworn statement that the notice was mailed," the three-judge panel ruled unanimously.

The only deposition testimony to support Murphy Oil's claim was by the benefits department manager, who said his department stuffed the notice into envelopes. "But he did not provide evidence that the envelopes were mailed, or, if they were mailed, to whom," the opinion stated.

Not enough evidence

Those responsible for addressing and mailing the envelopes provided no evidence to corroborate the manager's statement "that the notices were mailed, or how they were addressed," said the opinion. Two employees said "the mail room does not keep, as a matter of practice, any records, reports, codes or memoranda concerning what it sends out," the opinion stated. Furthermore, "the computers and printers that would have been used to address the envelopes were discarded in February 2006."

For their part, the plaintiffs produced four other employees from Mr. Custer's plant in Meraux, La., who also did not remember receiving the December 2002 notice.

"It is, of course, possible each of these employees received the notice and just forgot, but the testimony of these employees reveals individuals who carefully examined and stored such benefits documents and discussed benefit changes amongst each other," the opinion said.

There is "a genuine issue of material fact as to whether Murphy properly mailed the December 2002 notice to Custer," ruled the appeals court, which remanded the case to the lower court.

The appeals court did, however, uphold the lower court's dismissal of other allegations made by Mr. Custer, ruling that the language of the December 2002 notice was "sufficiently clear," that the company did not discriminate against Mr. Custer or interfere in the exercise of his ERISA rights, and that the modifications were properly approved in accordance with the plan.

F. Michael Custer; Marsha F. Custer, plaintiffs-appellants, vs. Murphy Oil USA Inc., formerly known as Murphy Oil Corp., defendant-appellee, 5th U.S. Circuit Court of Appeals, No. 06-30672, July 24, 2007.