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Retirement Planning > Social Security

High Court To Rule On ERISA Plan Benefit Determinations

By Arthur D. Postal

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The U.S. Supreme Court has agreed to take up a case involving questions about whether a company that both insures and administers an employee benefit plan has an inherent conflict of interest.

MetLife Inc., New York, asked the court to review the case to resolve differences in the rules federal courts in different regions of the country apply to plan benefit determination appeals.

The administrators usually operate under the Employee Retirement Income Security Act of 1974.

“Depending upon the circuit in which the benefit decision is reviewed, the dual status of an ERISA administrator may have no effect, may be considered as evidence of a conflict of interest, may change the standard of review, may change the burden of proof, or may make the administrator’s decision presumptively void,” MetLife says.

MetLife alone processes more than 290,000 disability claims a year, and it “desperately needs a resolution of this issue so that it knows how properly to manage its massive benefits business,” MetLife says.

Wanda Glenn, the insured in the case, MetLife vs. Wanda Glenn, 06-923, worked at a retail store in Ohio for 14 years. In 2000, she filed a claim for group disability benefits with a plan insured and administered by a unit of MetLife Inc., New York. Glenn told the plan she had developed a heart condition.

The plan paid short-term disability benefits, but MetLife later rejected Glenn’s request for long-term disability benefits.

The Social Security Administration awarded Glenn Social Security Disability Insurance benefits.

Glenn sued MetLife in federal court.

The U.S. District Court in Cincinnati declined to overturn MetLife’s decision, but a panel of the 6th U.S. Circuit Court of Appeals reversed the lower-court ruling.

MetLife’s decision “was not the product of a principled and deliberative reasoning process,” and the company “acted under a conflict of interest,” according to the 6th Circuit.

MetLife contends in court filings that ERISA specifically permits an insurer to insure and administer the same ERISA plan.

Requiring employers to hire separate insurers and benefits administrators to avoid conflict-of-interest allegations could increase plan costs, MetLife says.

“The more an employer has to pay for its benefit plans, the less generous the benefits will be,” MetLife says.

“The respondent concedes that there is a conflict among the circuits over whether the fact that an ERISA administrator is also a plan funder creates a conflict of interest,” MetLife says. “She also admits that this conflict is wide, deep and mature.”

The U.S. solicitor general also filed a brief asking the Supreme Court to review the case.

In the order granting certiorari, the Supreme Court says it wants to consider the following question, which was submitted by the U.S. solicitor general: “Whether an administrator that both evaluates and pays claims under a plan governed by ERISA is operating under a conflict of interest that must be weighed on judicial review of a benefit determination.”

The Supreme Court says it also wants to look at a question of its own: “If an administrator that both determines and pays claims under an ERISA plan is deemed to be operating under a conflict of interest, how should that conflict be taken into account on judicial review of a discretionary benefit determination?”

The Supreme Court has decided not to consider a question from the solicitor general about “whether an ERISA plan administrator must consider in its written benefit determination a decision of a Social Security Administration administrative law judge granting disability benefits.”

The court has asked lawyers for MetLife to submit a brief by Feb. 25, and it has asked lawyers for Glenn to file a brief by March 24.

A copy of the Supreme Court order granting certiorari is available ‘>Document Link

A copy of the solicitor general’s brief is available

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