Deferential review of plan’s denial of benefits OK, despite evidence of disclosure failures

The deferential “abuse of discretion” standard of review, used to affirm a pension plan’s denial of additional pension benefits to a participant, was the appropriate standard, in spite of the plan’s failure to timely produce relevant documents, the U.S. Court of Appeals for the District of Columbia (CA-DC) has ruled. The disclosure errors were not enough to warrant recognizing an exception to the deferential standard of review typically applied to the discretionary decisions of plan administrators.

At issue was whether the participant had accrued enough credited service with a predecessor plan during the period between 1959 and 1962 to increase the amount of his benefit from the successor plan. Records from that time were sparse, but plan administrators determined the participant had not demonstrated sufficient accrued credit during the period. Using the abuse of discretion standard, the district court found in favor of the plan. On appeal, the participant argued that the plan’s decision should have been reviewed de novo.

The appellate court affirmed the lower court’s use of the deferential standard and thus the denial of benefits. The successor plan explicitly grants discretion to plan administrators to determine benefits eligibility and falls within the standard set for deferential review by the Supreme Court in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).

The court acknowledged that several other circuits have carved out varying exceptions to this general rule upon the occurrence of procedural irregularities in a plan’s administration of a claim, but declined to rule in a similar fashion here. The predecessor plan was likely negligent in failing to maintain employment records from fifty years ago. That said, the current plan should not lose the advantage of deferential review because, for reasons beyond its control, information regarding the participant’s claim is limited.

Source: James v. International Painters and Allied Trades Industry Pension Plan (CA DC).

Visit our News Library to read more news stories.