Plan sponsors may take heart at a district court’s ruling supporting the interpretation of plan language by one of their own — but a partial dissent could spell more claims for equitable relief. The 6th U.S. Circuit Court of Appeals reversed a ruling for the plaintiff in a surviving-spousal benefits suit and supported the defined benefit plan sponsor’s take on its plan language. But a partial dissent by one panel judge may foreshadow more equitable relief claims. The case is Lipker v. AK Steel Corp. (10-5298, Oct. 31, 2012).
Background of the Case
Margaret Lipker is the widow of Frank Lipker, a 38-year employee of the defendant company, AK Steel Corp. He retired in 1999; after his death in 2008, confusion arose over the amount of Margaret’s surviving-spousal benefit under AK Steel’s pension plan.
She was first advised by the company that, under the terms of its pension agreement plan, she would receive a monthly benefit of $693 (equivalent to 50 percent of her husband’s pension benefit) minus 50 percent of her Social Security widow’s benefit but not less than $140 a month, which worked out to a benefit for her of $458. After checking with the Social Security Administration about Margaret’s widow’s benefit, the company recalculated her monthly pension payment to be a negative amount and told her that benefit would be the minimum $140 per month, under AK Steel Pension Agreement’s Section 4.3(d).
After receiving further information from SSA, the widow recalculated her expected payment from AK Steel using its formula and found she should be entitled to $450.50 per month. She objected to the company’s calculation and asked for an explanation. AK Steel referred her to a copy of the pertinent provisions from its plan.
After Margaret filed suit to recover the additional surviving-spousal benefits she believed she was owed, the U.S. District Court for the Eastern District of Kentucky in the first round of the case (09-00050, Feb. 24, 2010) ruled in her favor, agreeing with her calculation of her benefit.
Upon appeal, AK Steel urged the appellate judges to consult the Social Security Act for relevant law, which these judges said the district court “conspicuously failed to do.” Referring to the act’s definition of “widow’s insurance benefit” and restrictions it places on it, the 6th Circuit judges found that the plan terms established by AK Steel “become intelligible and unambiguous.” They agreed with AK Steel’s original benefit calculation for Margaret based on these findings, despite admitting she received “imprecise communications” about her widow’s benefit from SSA.
Other Important Implications
In his partial dissent, 6th Circuit Judge Mark A. Goldsmith brings up the broad and potentially influential concept of equitable relief raised when the U.S. Supreme Court first heard it in CIGNA v. Amara (131 S. Ct. 1866, May 16, 2011). The case has since been remanded to the U.S. District Court for the District of Connecticut. In December 2012 that court held in a new, related case, Amara v. CIGNA (2012 WL 6649587, D. Conn.), that a class of 25,000 CIGNA retirement plan members is entitled to benefits in addition to those provided by plan terms because the plan intentionally miscommunicated the impact of a change in retirement plan offerings in its Summary Plan Description, among other materials.
Finding out More
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For more information on pension survivor annuities and disability benefits, see¶462 in the Pension Plan Fix-It Handbook