Posted on January 28th, 2009 by Chad De Groot | 1 Comment »
Filed under: ., Employee Benefits, HR Issues | 
On Monday, the Supreme Court unanimously ruled that a plan administrator must act in accordance with plan documents in determining who is a proper beneficiary under a plan even though that beneficiary previously waived his/her rights to a benefit under the plan via divorce decree.
Kennedy v. Plan Administrator for DuPont Savings and Investment Plan has a fact pattern that is quite common in the HR realm, and a decision that should be heeded by all plan administrators. Mr. Kennedy was a participant in the DuPont Savings and Investment Plan. Under the plan, Liv Kennedy, his wife at the time, was named beneficiary. The two were later divorced and under the divorce decree Liv waived her rights as beneficiary under the plan. Mr. Kennedy, however, never changed his beneficiary designation under the plan prior to his death. Following his death, Mr. Kennedy’s daughter, as executrix of his estate, requested that the assets of his account under the plan be distributed to the estate. The plan administrator, however, relying on the plan documents and the beneficiary designation thereunder, paid the benefits to Liv.
The Court held that because a plan administrator has a duty, in accordance with Section 404(a)(1)(D) of ERISA (29 U.S.C. 1104 for you labor people), to administer a benefits plan in accordance with the plan documents, and the plan documents, or Mr. Kennedy’s beneficiary designation, named Liv as his beneficiary, the plan administrator was acting in accordance with the plan documents when it distributed Mr. Kennedy’s assets to Liv, even though they had divorced.
Although the outcome seems unfair, it is a necessary one to ensure consistent plan interpretation and operation. Mr. Kennedy had every opportunity to change that beneficiary designation. Although the divorce decree may have led him to believe that the beneficiary designation would be voided, the onus of determining proper beneficiaries cannot be put on the plan administrator. To do so would require every plan administrator to shoulder the additional burden of determining a deceased participant’s intent irrespective of his beneficiary designation.
Posted on May 5th, 2008 by Tim Eavenson | No Comments »
Filed under: Uncategorized |
The Seventh Circuit’s recent decision in Williams v. Interpublic Severance Pay Plan, No. 07-3146 (dec. April 29.2008) seems straightforward enough. It’s an ERISA case. It’s not very sexy.
But buried in there, underneath the actual legal analysis, are a couple of things worth mentioning.
1. Easterbrook Schools the Academics?
Judge Easterbrook focuses the first part of his holding on the use of trust law in analyzing ERISA cases. This seems appropriate, as the Supreme Court instructed as much in Firestone v. Bruch. But critics of the federal courts’ consistent deference to plan administrators’ decisions have been chastising the courts for years, saying they ignore trust law in favor of a rough amalgam of contract, administrative and labor law. And no one epitomizes the anti-deference movement like Yale professor John Langbein, who has written extensively on why he thinks the standard of review under ERISA is out of whack.
So it’s no suprise when Judge Easterbrook supports deference to the plan’s administrator, or when he uses contract law to do it. But when he supports his holding with “See generally John H. Langbein, The Contractarian Basis of the Law of Trusts, 105 Yale L. J. 625 (1995),” call me crazy but that’s more than just a holding. That’s a shot across the bow.
2. ERISA: the Cartoon
“Second, one must not anthropomorphize ‘the administrator.’”
Oh, how many geeky benefits conversations this unfortunate statement could start. What Disney animal would best represent “the administrator?” Would “the administrator” have a high-pitched squeak or a low, dopey voice? How many episodes would it take before “the administrator” would have an anthropomorphically similar character of the opposite gender?
Seriously, though, Easterbrook’s point is that administrator’s are “commonly large organizations” and don’t have any real “interest” in the day-to-day operation of the plan. I know, I know. ZZzzz.
But then, there it was. It might as well have been written in red.
There would be a real conflict of interest if a given administrator put in place a method of linking decisionmakers’ income to the substance of their decisions. A quota system…or some other means of tying the wages or promotion of staff to its disposition of claims could call for non-deferential judicial review.
Really? Somebody must have seen “Sicko“.
3. Please Deliver 9 Copies to: One First Street, Washington D.C.
Easterbrook ends his interest/deference analysis by noting that (what a coincidence!)the whole thing was presently before the Supremes in MetLife v. Glenn, which was argued (again!) six days before Williams was released. Make of that what you will.
Posted on March 25th, 2008 by Tim Eavenson | No Comments »
Filed under: Uncategorized |
Clearly a statement about
the overuse of acronyms, the Supreme Court has denied certiorari in a case between the
American Association of Retired Persons and the
Equal Employment Opportunity Commission.
The AARP petitioned after the 3th Circuit upheld a Commission rule that employers can offer reduced healthcare to older workers and retirees once they are Medicare-eligible, without violating the ADEA. The Supremes denied the petition Monday.
For it’s part, the AARP was none too pleased. AARP Legislative Policy Director David Certner, via On the Hill:
Beyond blatant age discrimination, the new policy is an ineffective Band-aid for the bigger issue facing American employers and workers: the skyrocketing cost of health care,” Certner says. “By allowing employers to reduce or even eliminate health benefits for retirees when they reach age 65, this rule essentially shifts the costs of all retiree health care on to the backs of older retirees.
“Blatant age discrimination” against retirees? You know who else has trouble finding affordable healthcare? Everyone who is still working. You knew when the boomers got in there they’d start fighting each other. Here’s my legal analysis: not letting employers adjust healthcare rates for the Medicare-eligible makes as much sense as me suing Hooters for discrimination when it rejected my application as a waitress. I mean if. If it rejected my hypothetical application.
Whatever, you get it. Just because something’s not equal doesn’t mean it’s not fair. Incidentally, the rule was promulgated at the insistance of labor groups and other associations, who feared that employers would reduce retiree health benefits across the board if they couldn’t take Medicare eligibility into account.
Still, it’s a funny, fickle Court they’re running out east. Six months ago, it seemed you couldn’t get into the place if you were under 55.
