DB administrators properly used SSA’s definition of “widow’s benefit” to calculate surviving spouse’s pension benefit

Defined benefit plan administrators properly interpreted the plan’s formula for calculating a surviving spouse’s pension benefit by using the Social Security Act’s definition of the term “widow’s benefit,” the U.S. Court of Appeals in Cincinnati (CA-6) has ruled. The term is used in the plan with express reference to the Social Security Act.

Plan terms

Under plan terms, a deceased participant’s surviving spouse was entitled to 50% of the participant’s monthly benefit, reduced by 50% of his or her Social Security widow’s benefit, but not less than $140 per month. Section 4.3(d) of the pension plan also provided that the amount of the widow’s benefit for purposes of the plan was to be determined “without regard to any offset or suspension imposed by such law.”

After the participant died, the Social Security Administration initially told his widow that her monthly widow’s benefit would be $458. Three weeks later, SSA corrected itself, stating the widow’s benefit would be $1469. The plan used this larger figure to calculate the widow’s surviving spouse benefit, with the result that her monthly benefit was about $300 less than it would have been, had the $458 figure been used.

The widow filed suit, arguing the plan owed her the larger monthly benefit under the terms of Section 4.3(d) of the plan. The district court sided with the widow, and the plan sponsor appealed.

Social Security Act

The dispute turned on the meaning, as used in the plan, of the terms “widow’s benefit” and “without regard to any offset or suspension imposed by such law.” While on their face neither of these terms have a “plain meaning,” the court reasoned, both terms are used in the plan with express reference to a law, the Social Security Act. Thus it is appropriate to turn to provisions of that Act to determine the meaning of the plan terms.

Under the Social Security Act, a widow’s benefit is the primary insurance benefit for her deceased husband. Then, the Act imposes a reduction in the widow’s benefit ($1,469 in this case), by the amount of old-age benefit to which the widow is entitled under her own work record ($1,011), leaving a widow’s benefit remainder ($458). This reduction is referred to elsewhere in the Act as an “offset.”

This statutory background, the court reasoned, made the plan’s formula for calculating the surviving spouse benefit clear and unambiguous. The widow’s benefit was, as the plan had originally determined, $1,469.

Other arguments

Case law relied upon by the district court was factually distinguishable and thus had little persuasive value. The court also rejected the widow’s argument that the employer’s decision was incorrect because it conflicted with the plan’s summary plan description. Even assuming that argument was still viable in the face of the Supreme Court’s decision in Cigna Corp. v. Amara (where the court held that terms of an SPD cannot be enforced over conflicting terms in the plan under ERISA §502(a)(1)(B)), the court concluded that in this case there was no conflict. The SPD was less complete than the plan in describing the surviving spouse benefit, but it was not inconsistent.

Source: Lipker v. AK Steel Corporation (CA-6).

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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