ERISA -- 2010

Conkright v. Frommert   (U.S. Supreme Court)

Deference to decisions by benefit plan administrators

In 2009, the NAM, the Chamber of Commerce and the Business Roundtable asked the Supreme Court to overturn a Second Circuit decision that interfered with administrative decisions by those who run company pension plans. The case on appeal involved how a Xerox Corp. administrator should account for lump-sum retirement payments made to employees who retired, but who later returned to work for the company. The trial court refused to allow the administrator to take into account the time value of the previous distribution.

We argued, and on 4/21/2010 the Supreme Court agreed, that this kind of decision, which involves an interpretation of benefit plan language, should be made the way courts normally make benefit decisions -- by deferring to the judgment of the plan administrator. The Second Circuit’s ruling drew an improper distinction between a formal benefits determination and decisions that relate to the plan but that are not actual claims. The Supreme Court held that courts should normally not interfere with reasonable interpretations by plan administrators, even if those administrators have made occasional mistakes in the past.

The Court's ruling is an important principle that will help manufacturers that want to offer retirement and other benefits to employees. Our brief argued that acceptance of the lower court's unorthodox test would call into question a variety of decisions routinely made by benefit plan administrators, such as (1) how to invest plan assets, (2) setting minimum annual funding levels, (3) deciding whether to seek subrogation and reimbursement from plan participants, (4) selecting an insurance underwriter for the plan and (5) determining when valuations and contributions of employer stock must be made.

ERISA class actions lead all other forms of workplace litigation, yet one of the primary objectives of enactment of the law was to encourage employee-benefits plans. The Supreme Court's 5-3 decision in this case returns certainty and predictability, and helps to minimize litigation expenses, administrative costs, and exposure to unanticipated benefits obligations.

Related Documents:
NAM brief  (September 21, 2009)


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