ERISA requires that benefit plans contain formal procedures for the adoption of amendments to the plan, including the underlying benefit programs. However, many employers routinely implement annual changes to their health and welfare benefit programs simply through the reissuance of benefit booklets without adhering to formal amendment procedures. A recent lawsuit brought by the Department of Labor against Macy’s underscores the consequences of bypassing the ERISA amendment rule.

The Facts of the Case:

Macy’s health plan document stated that amendments to the plan needed to be made by a written action approved by the Chief Executive Officer (“CEO”), or an officer to whom the CEO delegated that authority.
Benefit booklets prescribing the terms and conditions of benefits provided under the health plan form part of the “plan.”
As is not unusual, Macy’s made changes to its health benefit program administratively or through revisions to the benefit booklets at annual open enrollment. These routine changes were not formally approved via a written instrument executed by the CEO or his or her delegate.
The Department of Labor filed a lawsuit in federal court alleging that Macy’s breached its fiduciary duties by not following the terms of the plan, and that the benefit changes that had not been formally approved were not legally effective.


ERISA, the federal law governing employee benefit plans, requires that a plan be maintained pursuant to a written document. It further expressly requires that the terms of the plan “provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan.”

Retirement plans, such as 401(k) plans, are generally self-contained. Thus, when changes are required to be made to a retirement plan (which occur fairly infrequently), they are effected by a written document formally adopted by the employer and executed by an appropriate officer.

In contrast, health and welfare benefit plans usually are comprised of multiple documents, such as benefit booklets, summary plan descriptions and insurance certificates. These documents, taken together, form the “plan.” In addition, changes to benefit programs are typically made yearly. The customary approach to process the changes is for the employer’s human resources staff to discuss the changes with the insurance carrier or consultants, with the revisions then incorporated into the benefit booklets provided to employees during open enrollment. No formal action similar to that undertaken with respect to an amendment of a retirement plan is taken to adopt or ratify the annual health and welfare changes.

This informal practice of implementing benefit plan modifications has generally been acceptable, until last year when the Department of Labor filed a lawsuit against Macy’s, Inc. over a number of fairly minor matters. One such matter involved the effectiveness of a benefit change in the Macy’s health plan that was informally implemented. Macy’s plan document included the procedures for amending the plan. Specifically, it stated that amendments would be made by “written action approved by the Chief Executive Officer, or any officer of the Company to whom he delegates such authority as he deems appropriate.” However, the change at issue was implemented as a routine modification, and not formally adopted by means of the written action of an authorized officer as prescribed under the terms of the plan.

In the federal lawsuit, the Department of Labor alleged that Macy’s breached its fiduciary duties under ERISA by failing to discharge its duties in accordance with the documents governing the health plan. The prayer for relief included a request that the court order Macy’s to re-adjudicate all the benefits that were paid under the revisions that had not been formally approved.

Many employee benefit plans have amendment procedures similar to Macy’s providing that amendments must be made via a written instrument approved and executed by the Board, the chief executive officer or some other senior officer. Other plans do not provide anything at all.

What You Can Do

ERISA cannot be ignored. In that regard, it is our advice that health and welfare plans be reviewed to ensure that (i) amendment procedures are in fact prescribed in the governing plan document, and (ii) the procedures are consistent with the manner in which changes to benefit offerings are actually implemented. Otherwise, the Department of Labor or a covered employee could bring a claim asserting that informally implemented plan changes are not legally effective, which constitutes a breach of the employer’s fiduciary duties.

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