Obtaining participant consent to benefit distribution.

• Author: Amoroso, Vincent

In Franklin, 983 F2d 939 (1993), rev'g DC Cal., the Ninth Circuit confirmed the importance of receiving formal participant consent before distributing qualified plan benefits, even though the participant may have requested the distribution.

In August 1988, Roberta Franklin sent a letter to the administrator of her former employer's pension plans, and a letter to her former employer (Thornton), as trustee of the plans, requesting distribution of her plan interests. Thornton sent Franklin a reply that included consent documents and listed her account value at $67,141. In the meantime, however, Franklin had spoken with a financial adviser who recommended that she keep her money in the plans' fund where it could earn a higher rate of return. As a result, Franklin did not sign or return the consent documents.

In December 1988, Thornton sent a new set of consent forms and an updated, year-end calculation of Franklin's account, now valued at $68,713; once again, Franklin did not sign the forms. On advice of the plan administrator, Thornton sent Franklin a check for $68,713. Franklin returned it a few days later with a letter clarifying that she was interested in a distribution, but only if the valuation date was acceptable to her. In response, Thornton deposited the amount in an interest-bearing savings account. Franklin also sent the administrator a letter, stating that she was interested in receiving her benefits, but explicitly stating she would not consent to a valuation date on Sept. 30, 1988.

Franklin sued Thornton, claiming breach of fiduciary duties under Sections 404 and 409 of the Employee Retirement Income Security Act of 1974 (ERISA), and

seeking to enforce and clarify her rights under the plans. The district court granted Thornton summary judgment, concluding that Franklin's written consent was not required prior to a valid distribution of her plan interests, or alternatively that Franklin's initial August 1988 letter was an effective written consent. The court also ordered Franklin to pay Thornton's attorney's fees and expenses.

In holding that Franklin's consent was not required under the plans, the district court had relied on plan language that seemed to require consent only if the plans' joint and survivor annuity provisions were applicable. However, on appeal the Ninth Circuit found that the district court had ignored other sections of the plans clarifying that the joint and survivor annuity provisions of the plans applied...