Equitable Estoppel as a Remedy under ERISA

By Hoskins, Robert E. | South Dakota Law Review, Fall 2011 | Go to article overview

Equitable Estoppel as a Remedy under ERISA


Hoskins, Robert E., South Dakota Law Review


The Employee Retirement Income Security Act of 1974 (ERISA) is a comprehensive law that encompasses almost all aspects of employer-provided benefits in America. ERISA is premised on trust law and equitable principles. Since its passage, the Supreme Court has developed certain criteria to determine whether various equitable principles are available as grounds for relief under ERISA's remedial provision. Estoppel is one of the oldest and most firmly entrenched equitable principles in the American court system. Nearly every Federal Court of Appeals has recognized equitable estoppel as a doctrine available under ERISA to some extent, but the United States Supreme Court has never directly decided the issue of whether estoppel has a place in ERISA jurisprudence. This article explores the history of equitable estoppel, the passage of ERISA, and the development of the federal common law of ERISA through Supreme Court precedent. The article next provides an overview of the circumstances in which the various Federal Courts of Appeal recognize equitable estoppel with ERISA cases. Finally, the article analyzes the method by which the United States Supreme Court might come to recognize that equitable estoppel has a place in ERISA jurisprudence and concludes that the Court would likely allow use of estoppel principles only in very limited factual circumstances.

I. THE HISTORY, PASSAGE, AND INTENT OF ERISA

Before addressing why and how equitable estoppel has a rightful place in the law of ERISA, it is helpful to have some understanding of the facts and circumstances that led to ERISA's enactment and the way the Supreme Court has interpreted ERISA since its passage. The Supreme Court has stated:

   On September 2, 1974, following almost a decade of studying the
   Nation's private pension plans, Congress enacted the Employee
   Retirement Income Security Act of 1974 (ERISA).... (1) As a
   predicate for this comprehensive and reticulated statute, Congress
   made detailed findings which recited, in part, "that the continued
   well-being and security of millions of employees and their
   dependents are directly affected by these [retirement] plans; [and]
   that owing to the termination of plans before requisite funds have
   been accumulated, employees and their beneficiaries have been
   deprived of anticipated benefits...." (2)

In Nachman, the Supreme Court discussed the detailed history of pension plan failures in America, which prompted the United States Congress to address the situation, resulting in the enactment of ERISA in 1974 (when the law was finally enacted it applied to much more than retirement/pension plans). (3) The Court went on to state:

   One of Congress' central purposes in enacting this complex
   legislation was to prevent the "great personal tragedy" suffered by
   employees whose vested benefits are not paid when pension plans are
   terminated. Congress found "that owing to the inadequacy of current
   minimum standards, the soundness and stability of plans with
   respect to adequate funds to pay promised benefits may be
   endangered; that owing to the termination of plans before requisite
   funds have been accumulated, employees and their beneficiaries have
   been deprived of anticipated benefits." Congress wanted to correct
   this condition by making sure that if a worker has been promised a
   defined pension benefit upon retirement--and if he has fulfilled
   whatever conditions are required to obtain a vested benefit--he
   actually will receive it. (4)

There had been several well-publicized failures in America's pension system in the decade or so before ERISA was passed. In Nachman, Senator Williams, a sponsor of the ERISA legislation is quoted as saying:

   A classic case, of course, is the shutdown of Studebaker operations
   in South Bend, [Indiana], in 1963, with the result that 4,500
   workers lost 85 percent of their vested benefits because the plan
   had insufficient assets to pay its liabilities. … 

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