After taking medical leave from her job, Wanda Glenn submitted a disability claim under her ERISA plan. Although MetLife approved her claim, it urged her to seek Social Security benefits, which she did. After reviewing information from Glenn’s physician indicating her improved condition and ability to do sedentary work, MetLife concluded that she was no longer eligible for disability benefits and denied her claim for long-term disability benefits.
Glenn challenged the decision in federal court, with the district court upholding MetLife’s denial of long-term disability benefits.
The Sixth Circuit reversed, holding that MetLife's dual role in both administering and funding the plan created an “apparent conflict of interest.” Based on this conflict of interest, the court concluded that MetLife’s decision “was not the product of a principled and deliberative reasoning process” and ordered MetLife to reinstate Glenn’s benefits. The Circuit Courts were split on this issue, with some Circuits not requiring courts to consider an administrator’s dual role when reviewing benefit determinations.
The Supreme Court ruled on 6/19/08 that it is proper for a court to consider a conflict of interest as a factor in reviewing the validity of a plan administrator's decisions regarding benefits. The circumstances of each case should be reviewed, and the fact that a company acts both to fund and administer a benefit plan may cause the administrator to act contrary to the interests of the beneficiaries of the plan. Normal fiduciary trust principles apply.
This case is very important to all businesses offering employee benefit plans subject to ERISA, as jointly funded and administered plans are common. The ruling means that the costs of funding and administering ERISA-regulated benefit plans are likely to increase.