BOSTON - Putnam Investments Inc., one of the nation's largest retirement plan administrators, could have egg on its face for improperly administering its own retirement plan.
Earlier this year, Putnam informed Edward A.H. Siedle, a former employee, that he was not entitled to any of the $20,381.54 the company's profit-sharing plan statements showed he was owed.
Mr. Siedle left Putnam, where he was legal counsel, in late 1988.
In a Jan. 8 letter, Donald E. Mullen, Putnam's director of benefits, wrote Mr. Siedle that the entire amount had been removed from his profit-sharing account because he was not vested in the plan, and therefore not entitled to any money.
When he contacted Putnam, Mr. Siedle learned he was in fact entitled to some of the money.
Based on his two years of employment at Putnam (from December 1986 to November 1988) and Putnam's five-year vesting schedule, Mr. Siedle was told in a Feb. 25 letter from Mark D. Goodfellow, manager of retirement plans, that he was 25% vested in the profit-sharing plan, and the company should have taken back only 75% of his balance.
According to Mr. Goodfellow's letter, the company had continued to set money aside in Mr. Siedle's profit-sharing account long after he left because "your termination date was not input to the retirement system until the second quarter of 1996."
In a March 3 letter, Mr. Goodfellow said Mr. Siedle's correct account balance in the profit-sharing plan - in which Putnam sets aside money each year for employees - was only $4,992.65.
"I'm sure the statement indicated his vesting continued even though he was terminated," said Janet E. Tosi, a Putnam spokeswoman. "Obviously you don't get vesting service after you have terminated."
In a prepared statement, Putnam said, "We terminated this employee in 1988, and the problem he cites in relation to his account should have been apparent to him many years ago from reviewing his quarterly statements."
But Mr. Siedle says employees fully expect plan statements to be accurate. "The argument that I should have known better is preposterous," he said. "What they're saying is that I should have been a better plan administrator than they were."
Moreover, while Mr. Siedle said he can't recall if he received a summary plan document when he worked at Putnam a decade ago, he has not received any since, he said.
The Labor Department requires plan sponsors must give participants a summary plan document every five years if the plan is amended, and once a decade if it is not.
At his request, Mr. Siedle received a copy of the plan document from Putnam recently.
Putnam is a bundled service provider to more than 1,420 plan sponsors representing more than 700,000 participants, according to Pensions & Investments' directory of defined contribution service providers (P&I, March 31).
Ms. Tosi said Mr. Siedle was the only person affected by the mistake, and the company maintains separate systems for plans run for outside clients. Ms. Tosi could not say how the company detected its mistake almost a decade later.
But Mr. Siedle, who said he will sue the company unless it restores his entire account balance, remembers Mr. Mullen told him Putnam found the mistake while upgrading the company's computer systems to get rid of errors.
Ms. Tosi declined to say if the company would restore the entire amount originally reported.
But some federal pension law and record-keeping experts say Mr. Siedle faces a tough fight in trying to recover the disputed $15,388.89.
Mr. Siedle could sue Putnam for violating Section 204(g) of the Employee Retirement Income Security Act, which forbids employers from cutting back accrued benefits, suggested a pension lawyer who declined to be identified. Mr. Siedle also could sue Putnam for failing to give accurate information to participants, a basic tenet of ERISA, the lawyer said.
But "if it's only one guy, I think he loses," the ERISA lawyer said. "If it turns out there's a bunch of (employees) and a pattern of sloppiness, they have got a much better claim."
Moreover, Mr. Siedle would have to prove it was reasonable for him to rely on the account statements, which showed he continued to build up vesting after he had quit Putnam, even though the vesting schedule is clearly laid out in the summary of the plan given to all participants, the lawyer said.
Larry Heller, a consultant in the defined contribution division of Kwasha Lipton, the Fort Lee, N.J., benefits consulting firm, noted such "administrative errors" are not unusual.
Plan sponsors, he said, can take a hard line and decide not to budge from their position that employees should not get a penny more than their entitlement. Or, Mr. Heller said, Putnam could decide to give Mr. Siedle the entire amount because "if the number has appeared year after year, even if it is technically not a promise, it tends to look like one."
Mr. Heller noted Kwasha Lipton advises all clients to include a caveat in their plan documents that the sponsor has the responsibility for fixing any mistakes. Putnam's own plan document includes a paragraph stating the plan administrator "may correct any defect, supply any omission, reconcile any inconsistency, and adopt such rules, regulations and procedures with respect to the administration of the plan in such manner and to such extent as he may deem necessary and expedient to carry out the plan."
But Mr. Siedle is not giving up.
"These guys are doing a sloppy job of tracking retirement benefits and for the past 10 years I have been assuming this money is there. Then if they tell me that the money is not there, I don't accept that," Mr. Siedle said.
In an April 3 letter, Mr. Siedle wrote Mr. Mullen that Putnam's plan document states the company's intention is to help employees "provide for their future needs by affording them the opportunity to share in the profits of the employers."
But, his letter added, "major administrative errors may have devastating effects on the financial security of participants; even seemingly minor errors in accuracy may have a significant impact on the financial security of participants due to the long-term nature of the investment program."
Mr. Siedle has also contacted Labor Department officials.
Joan Escoffery, investigator in the department's Boston office, did not return phone calls seeking comment.