Because company benefit packages including pensions are a critical component of the employment relationship, see MetLife, Eighth Annual Study of Employee Benefits Trends: Findings from the National Survey of Employers and Employees at 8, 18 (2010) (hereinafter Eighth Annual Study), affirmative misrepresentations or knowing omissions about those benefits puts employees in a disadvantageous position because they may overvalue their benefits, accept lower compensation, or stay with that employer longer. Teresa Ghilarducci, Pensions & The Uses of Ignorance by Unions and Firms, 11(2) J. Lab. Res. 203, 204, 206 (Spring 1990).
In enacting ERISA, Congress sought to hold employers accountable for the benefit they promised employees by requiring accurate, understandable, and timely disclosures. See Nachman Corp. v. Pension Ben. Guar. Corp., 446 U.S. 359, 374-75 (1980); ERISA § 2, 29 U.S.C. § 1001. If pension disclosures are accurate and understandable, whether participants specifically read them or learned about them by another method, participants can make informed decisions concerning their benefits and employment, ranging from protesting, looking for new employment, or saving more. E.g., Richard A. Oppel, Jr., Companies Cash In on New Pension Plan; But Older Workers Can Face Penalties, N.Y. Times, Aug. 20, 1999.
ERISA’s statutory language neither creates nor compels a subjective reliance or prejudice standard in its disclosure requirements, see ERISA §§ 101-104, 29 U.S.C. §§ 1021-1024, and one should not be inferred from the statute’s clear language. See Hardt v. Reliance Std. Life Ins. Co., 130 S. Ct. 2149, 2156 (2010). If plans have no incentive to provide accurate and understandable summary plan descriptions, many participants will have trouble understanding them and remembering their provisions. See U.S. Dep’t of Labor, Employee Benefits Security Administration, ERISA Advisory Council, Report of the Working Group on Communications to Retirement Plan Participants (Nov. 2005) (hereinafter Report of the Working Group). A detrimental reliance or prejudice standard which requires reading, understanding, and recollection will be impossible for most participants to prove and is inconsistent with Congress’ carefully crafted disclosure scheme.
See Sewin Chan & Ann Huff Stevens, What You Don’t Know Can’t Help You: Pension Knowledge and Retirement Decision Making, 90(2) The Rev. Econ. & Stat. 253, 260-61 (May 2008).