Joseph Griggs took early retirement after 32 years with DuPont. The company was offering certain employees a special pension benefit. For Griggs, that would equal a year's salary, in addition to his regular pension.
The company told employees they could roll over this special pension benefit in a lump sum into another retirement plan. As a result, there would be no taxes due. Imagine Griggs' shock when, after receiving a check for about $133,000 after retiring, he was forced to pay $50,000 in taxes. Griggs sued under the Employee Retirement Income Security Act (ERISA) and the court sided with him.
DuPont messed up by not 'fessing up what it knew. Months before Griggs applied for the payout, DuPont knew the tax code would prevent workers like him from rolling over the entire amount. And two weeks before he retired, DuPont knew that most, if not all, of his payment would not qualify for the rollover he had picked.
DuPont tried to fall back on a statement printed on the benefits application saying it was the applicant's responsibility to obtain independent financial and tax advice. But that wasn't enough. Once the company learned that Griggs was acting on a misunderstanding based on DuPont's description of the program, it had a fiduciary duty to fix the mistake.
A lower court was ordered to consider such options as reinstating Griggs or allowing him to alter his distribution of the benefits. (Griggs v. E.I. du Pont de Nemours & Co., Nos. 99-2508, 99-2607, 4th Cir., 2001)
Advice: When dealing with employees' retirement funds, being "technically correct" under the laws may not be enough. Courts and juries will nail you. Make sure your staffers who deal with retirement questions know the law, and then go the extra mile in anticipating problems for them.
You don't have to provide individual tax advice. But even a simple statement about the eligibility limits on a lump-sum rollover might have kept this employer out of court.