Do you carefully review communications prepared by your recordkeeper? A court may rewrite the provisions of your plan if you don’t.
Incomplete or inaccurate notices and SPDs are more common than you think and can be a hidden trap for fiduciaries who simply pass vendor materials on without checking them. The use of AI to draft communications is also contributing to this problem. AI-drafted documents can still contain mistakes and plan fiduciaries may not understand that they are responsible for the content of documents drafted using AI. Deficient communications create litigation exposure and could result in a court ordering that the participants receive costly additional benefits.
The Kinder Morgan Decision. Consider the recent decision in Pederson v. Kinder Morgan Inc. ( No. 4:21-CV-0350, S.D. Tex. August 10, 2026). Kinder Morgan changed the way service was calculated for a group of participants hired before age 35 in a way that resulted in a decrease in their future benefits. (As required by ERISA and the Internal Revenue Code, this change was effective only prospectively, as accrued benefits cannot be reduced retroactively.) The change removed a cap on the service in the denominator of a faction that was part of the benefit formula. Quoting liberally from a Second Circuit decision in Amara v. Cigna, 775 F.3d 510 (2d Cir. 2014), a case that went up to the U.S. Supreme Court and was remanded for further consideration, the Court found that the subclass was injured by the omission. The Court inferred from the lack of complaints before the named plaintiff discovered the error when he requested a benefit calculation that participants were unaware of the change . The court stated:
The SPDs failed to explain, in a manner calculated to be understood by an average participant, that employees hired prior to age 35 "do not earn the 2% of pay benefit promised in the SPD, but instead may earn as little as 1.33% of pay after a fraction based on the years between their date of hire and age 65 is applied." Id. at 745. This violation of [ERISA] § 102 "risk[ed] misleading participants who were hired before age 35 as to their total amount of accrued benefits." Id. at 747.
The Court determined that fraudulent intent or bad behavior was not required in order to reform the plan to provide benefits as if the undisclosed calculation change had not been made. It found that fraudulent behavior in this context includes omission or concealment involving breach of a legal duty or trust.
Why This Problem is Pervasive. Most plans we see today are set up using plan documents provided by their recordkeeper and that have been pre-approved by the IRS. Recordkeepers for these plans often use “one size fits all” notices and summary plan descriptions with language such as “Your plan may include bonuses in plan compensation. Ask your plan administrator for more information.” It is not clear that these communications even satisfy the requirements of ERISA because the Department of Labor’s regulations require that SPDs disclose all of the material provisions of a plan in language understandable to the average plan participant. This practice avoids the need for recordkeepers to customize communications for plan sponsors using their documents, but at the expense of participants and fiduciaries, who are entitled to clear information about how the plan provisions work.
What Can Fiduciaries Do About It? A common situation in which “one size fits all” and even individually drafted SPDs fall short is when there has been an acquisition or plan merger. Recordkeepers may leave out specific language highlighting grandfathered benefits, grandfathered vesting schedules or minimum benefit formulas. I often even see SPDs that don’t tell participants in a merging plan that in the future their benefits will come only from the surviving plan. Special care should be taken in reviewing all SPDs following any significant corporate transaction.
However, review should not be limited to those situations. The consolidation in the recordkeeping industry means that the people dealing with your plan today may not be the ones who helped set it up, increasing the likelihood that even basic plan provisions may be misdescribed.
There is no substitute for legal review of all plan communications for accuracy and completeness. As the Kinder Morgan decision illustrates, failure to do so can be penny-wise but pound foolish. And if the recordkeeper resists changing its template documents to make suggested changes, a custom SPD should be considered. Recordkeepers often make this option available to those using their pre-approved plans with a caveat that they are not responsible for any language that you add or change. Sponsors of individually-designed plans always have the custom SPD option and can craft their own documents. These should be prepared by the plan service providers and reviewed by the fiduciaries with the goal of describing all provisions that can affect eligibility, vesting, or benefits clearly.
The key takeaway here is that when drafting plan communications, less is not more.
Carol Buckmann is the author of The Intelligent Fiduciary-How to Navigate ERISA’s Fiduciary Responsibilities.
The Intelligent Fiduciary makes ERISA responsibilities easier to understand and apply. Learn more about the book here. https://theintelligentfiduciary.com