Lawyers handling Employee Retirement Income Act (ERISA) cases will tell you that the answer to the above question is … nothing happens.
Generally, the United States Supreme Court has not allowed any remedy that is not clearly expressed within ERISA’s provision 29 U.S.C. Section 1132. Section 1132 allows for injunctive relief and the monetary remedies limited to (1) up to $100 per day for a plan administrator’s failure to provide certain documents to a plan participant within 30 days of a proper written request, and (2) benefits that should have been paid under the plan pursuant to Section 1132(a)(1)(B).
A narrow opportunity for an additional monetary remedy is created by allowance of “other appropriate equitable relief” under Section 1132(a)(3). The Supreme Court’s decision in CIGNA Corp. v. Amana opened the door to a potential monetary remedy under paragraph (a)(3), reviving the term “surcharge” relief from decisions by the equity courts during the days of the divided bench. Surcharge relief is available for certain consequential damages that might result from violations of ERISA. In SIGNA, the claimants alleged violations of ERISA due to improper notice of modifications to the Cigna pension plan that resulted in financial harm to some pensioners. The court allowed that monetary relief might be available to some plan participants as a “surcharge” remedy.
As a general rule, no monetary award is permitted other than benefits due under the plan. No consequential or punitive damages are available for the delay in processing a benefit claim made under an ERISA plan. In the case Massachusetts Mutual Life Insurance Co. v. Russell, the plaintiff was paid the disability benefits due her under the plan, but she sued due to a delay of 132 days in payment. She asserted that during the delay her husband had to cash out retirement savings in order for them to make ends meet and that her disabling impairments were exacerbated by the delay. The Court held that the claimants’ request for consequential and punitive damages interfered with the Act’s remedial provision in Section 1132(a).
As a result, there are no serious negative consequences for a claim fiduciary’s non-compliance with the claims procedures established by the Secretary of Labor. The only redress that an ERISA plaintiff can hope to obtain for a fiduciary’s abuse of the claims process is (1) gaining a level playing field, i.e. a judicial decision vacating the abuse of discretion standard of review in favor of a preponderance of the evidence standard, or (2) obtaining a remand by the district court to the claim fiduciary for another review, a decidedly hollow victory.