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April 21, 2010 at 08:00 PM
WASHINGTON BUREAU — The U.S. Supreme Court has issued a ruling that appears to limit the ability of the federal courts to review benefit plan administrators’ decisions from scratch.
Members of the court today handed down a 5-3 decision holding that a federal district court has an obligation to defer to a “reasonable interpretation” made by an administrator of a plan governed by the Employee Retirement Income Security Act in cases in which the plan administrator has arrived at a decision outside of an administrative claim for benefits.
The decision, in Conkright vs. Frommert, Number 08-810, concerns a case involving employees of Xerox Corp., Norwalk, Conn., who left the company in the 1980s, accepted lump-sum benefits settlements, and later returned.
The employees challenged the method used by the plan administrator to calculate their new retirement benefits.
A district court sided with the employees and ordered the plan administrator to re-evaluate the decision. The employees then challenged the second decision by the plan administrator, and the district court supported the employees.
The 2nd U.S. Circuit Court of Appeals held that the district court was correct not to apply a deferential standard on remand, and that the district court’s decision on the merits was not an abuse of discretion.
The Supreme Court reversed the 2nd Circuit decision and has limited the grounds federal courts can use to review ERISA plan decisions “de novo,” or “with a clean slate,” and without deferring to the decision of the plan administrator.
