The 9th U.S. Circuit Court of Appeals decided that an insurance certificate was an official plan document that overrode the plan’s summary plan description. It shows that plans are vulnerable when they attempt to set out plan terms in the SPD only without corresponding language in the official plan document. For stronger plan design, the SPD should reflect what’s in the main, official document, not add new policies to the plan, the ruling indicates.
The SPD contained a reservation of discretionary authority for the insurer, but the court disregarded the plan’s argument that the SPD was the only official plan document. Because the insurance certificate didn’t reserve discretionary authority for the insurer, the circuit court decided in Prichard v. Metropolitan Life Ins. Co., 2015 WL 1783507 (9th Cir. Apr. 21, 2015), the district court should have reviewed its adverse determination de novo and not for abuse of discretion.
The Facts
Matthew Prichard was covered by IBM’s LTD plan, which was insured and administered by MetLife. He received LTD benefits in January 2007, based on a psychiatric disability. MetLife applied a two-year limit on his benefits, then denied his application for an extension. Prichard sued under ERISA.
MetLife said the SPD conferred discretionary authority to the plan administrator, and that should have guaranteed the court’s use of an abuse-of-discretion, rather than a de novo, standard of review. That argument failed.
Note: If plan documents include specific language stating that the administrator or other fiduciary has discretionary authority to determine eligibility for benefits and to construe plan terms, courts generally apply the less stringent arbitrary-and-capricious standard.
Under a de novo review, a court may apply its own interpretation, rather than deferring to the plan administrator’s interpretation of the plan.
Arguments
Prichard argued that under CIGNA v. Amara, 131 S. Ct. 1866 (2011), SPDs may not be enforced as plan terms because no official plan document assigned discretionary authority to MetLife.
The U.S. Supreme Court in Amara held that “the summary documents, important as they are, provide communication with beneficiaries about the plan, but that their statements do not themselves constitute the terms of the plan.” That case ordered a reformation of a pension plan, because the SPD misled employees about the nature of official plan policies.
Other circuits have ruled that the SPD can hold sway when no policy exists in official plan documents, the circuit admitted.
And MetLife argued that because no conflicting language existed in the official plan document, that the SPD terms should prevail. IBM’s health benefits manager testified that “no separate formal plan document existed for the plan beyond the SPD booklet.” The insurer also argued that the insurance certificate contained no more than the terms of the insurance contract between MetLife and IBM.
But in spite of rulings giving SPDs force in the absence of conflicts, the 9th Circuit rejected MetLife’s arguments.
The the insurance certificate contained relevant terms and provisions; and it was the “final authority” in the event of a conflict with the SPD. And it was not merely a contract between the plan and insurer — it was “clearly issued to and written for” IBM’s ERISA-plan members.
The certificate comprehensively and exclusively contained all terms and provisions governing IBM LTD plan members. And the SPD ceded authority to “official plan documents,” advising plan members that it would not govern if it were to conflict with the official document.
Therefore, the appeals court ruled that the district court erred in finding that the SPD constituted the plan document and in fact the insurance certificate was the official document, and the certificate had the force of the ERISA plan document.
For more information on the standard of review courts use in ERISA cases, see Section 716 of the Guide to Self-Insuring Health Benefits.