Groups Plead to Preserve Plans’ ERISA Discretionary Authority

Four groups — the ERISA Industry Committee, the American Benefits Council, the U.S. Chamber of Commerce and the Business Roundtable — filed an amicus brief July 26 to urge 2nd Circuit judges to support the principle of deference to plan administrators’ decisions over benefit plans.

When plans reserve discretionary authority in plan documents, courts must review the plan’s interpretation of ambiguous terms under an “abuse-of-discretion” standard, and may not overturn the plan’s reading “de novo,” by introducing their own reading of terms. The groups argued that plan administrators’ authority is critical to ERISA’s goals of uniform plan administration and minimal litigation.

The dispute in Conkright is whether Xerox Corp. excessively reduced employee retirement benefits for a group of employees who left, then rejoined, the company. A lump-sum benefits distribution was to be subtracted from future benefits when the workers rejoined the company. Employees contend they were shortchanged.

The plaintiffs argued that because, by law, no employee’s pension benefits can be reduced by conditions that were not properly communicated in a summary plan description, Xerox’s interpretation of the plan for returning former employees should be ignored because it failed to notify plaintiffs of the offset.

The plaintiffs (joined by the U.S. Department of Labor) argued that the plan’s discretion can be overturned when it ignores participants’ reasonable reading of ambiguous plan provisions.

Initially, the U.S. District Court for the Western District of New York favored the Xerox plan administrator, ruling that it used a proper method and employees had adequate notice. But the 2nd Circuit overturned that decision (Conkright v. Frommert, 535 F.3d 111 (2nd Cir., July 24, 2008)), concluding that the method constituted an improper cut-back of ERISA benefits.

The U.S. Supreme Court took the case. The 5-3 decision written by Chief Justice Roberts (Conkright v. Frommert, 2010 WL 1558979 (April 21, 2010)) overturned the appeals court decision. The High Court remanded the case to the district court, which in December 2011 again ruled Xerox’s favor. The plaintiffs appealed to the 2nd Circuit again. In the interim, the Supreme Court issued its decision in Amara, giving the plaintiffs new hope.

Go here for a story focusing on the benefit plan issues in Conkright, and here for more information about the groups’ amicus brief.

For more information about ERISA health plan administrators, see Tab 540 of the Employer’s Guide to Self-Insuring Health Benefits.