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ADR in ERISA Claims: ABA-TIPS Funds Pilot Pension Project

by Linda E. Rosenzweig

Pension laws confer important legal rights to millions of older Americans. However, many individuals cannot enforce their rights because litigation is the only impartial dispute resolution mechanism provided by ERISA, the federal private pension law. The legal fees incurred in bringing an ERISA claim to trial typically far outweigh the monetary benefits at stake, and older participants are often reluctant to subject themselves to the delay, stress, and other nonpecuniary "transaction costs" of court proceedings.

Lawyers are often reluctant to agree to handle such litigation because of

  • the difficulty of explaining complex ERISA concepts to judges;
  • the disinterest shown by many courts in small, highly individualized benefit claims; and
  • judicial reluctance to exercise their discretion under ERISA to award attorneys' fees to a prevailing participant.

Consequently, there is a significant and serious gap in the delivery of legal services in this area. No program currently exists that addresses this nationwide problem.

Paving the Way with an Early Expert Evaluation Program

A logical choice for addressing this deficiency is an alternative dispute resolution program. The Tort and Insurance Practice Section of the ABA is funding a pilot pension project with the objective of ascertaining the feasibility of a voluntary, nonbinding alternative dispute resolution program for pension claims.

The concept of implementing a voluntary, nonbinding ADR approach using expert neutrals has been the subject of considerable discussion within the ERISA bar, as well as on Capitol Hill. TIPS Employee Benefits Committee members have met informally with members of four of the ABA Employee Benefits Committees to discuss the elements of such a program.

As envisioned by this group, the program would be an Early Expert Evaluation program established by federal legislation and administered by the Labor Department, together with a private sector board of dispute resolution experts and pension professionals.

The group has also met with counsel and staff for the Senate Special Committee on Aging to discuss the Pension Tools Act. The Act addresses the establishment of a dispute resolution program for pension claims. It was introduced by Sen. Charles Grassley (R- IA), Chair of the Senate Special Committee on Aging, and Sen. John Breaux (D-LA).

Legislation has not yet been enacted. A major obstacle has been the unwillingness of a private bar group to take responsibility for developing and maintaining the roster of expert neutrals, and to provide for their training. This innovative pilot project would directly address this problem and pave the way for development of a nationwide program.

Who's Involved?

The Project will develop and test a model voluntary, nonbinding method of resolving pension disputes that will meet the needs of plan participants and plan sponsors. The project will invite private bar ERISA experts to serve as neutral evaluators. The TIPS Employee Benefits Committee has more than 400 members from whom the project director will draw as volunteers. In addition, the TIPS Employee Benefits Committee will maintain the roster of participating lawyers, who will be given training in Early Expert Evaluation techniques. A lawyer need not be a member of TIPS in order to participate in this Project.

Potential clients for the program will be identified by the Pension Information and Counseling Demonstrating Program of the U.S. Administration on Aging (AoA). It is anticipated that between one and three cases will be resolved during the one-year grant period.

Coordinators will also encourage involvement from the U.S. Labor Department, the AoA, and the Senate Special Committee on Aging. Toward the end of the grant period, project coordinators will seek support from government agencies and private foundations to expand the institutionalize the program.

In addition, the Pension Rights Center, a 23-year-old consumer organization that works to protect and promote the pension interests of workers and retirees, will serve as a consultant throughout the project. The Pension Rights Center served as the technical assistance backup center for the AoA's Pension Information and Counseling Demonstration Program, involving ten local pension counseling projects across the country. The Center will have primary responsible for identifying potential plan participants for the project, and will serve as consultant to the project during the grant period.

If it is determined that this form of dispute resolution is feasible, the model ADR will be adaptable for use in resolving disputes involving other types of employee benefits. One of the primary intentions is that this unique project will be replicated and used by other interested groups throughout the country.

Linda E. Rosenzweig, an ERISA lawyer in Chevy Chase, Maryland, was the chair of the TIPS Employee Benefits Committee from 1995-1997. She will serve as the director of the TIPS Pilot Pension Dispute Resolution Project. Please contact her if you are interested in participating in this Project at 301-986-0084; 301- 986-0085 (fax); or

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