Plan’s benefits committee abused its discretion by denying claim for retroactive pension benefits

A district court properly reviewed evidence extrinsic to the administrative record to conclude a pension plan’s benefits committee abused its discretion when it denied a participant’s claim for retroactive benefits, the U.S. Court of Appeals in Richmond (CA-4) has held. The appellate court upheld an award of $121,000 in retroactive pension benefits that the participant should have begun receiving years earlier, after the plan was amended to permit receipt of full benefits by participants at least 55 years of age.

Retroactive benefits

A pension plan participant resigned after 17 years of service and when she was under age 55. Years later, when she neared age 65, she contacted her former employer’s pension benefits center to learn what her benefit would be once she turned 65. Instead she was told (she said for the first time) that the plan had been amended years earlier to permit full receipt of benefits for participants who were at least 55 years old. She filed a claim for retroactive benefits which the plan administrator denied. Based on its review of the administrative record, the plan’s benefits committee upheld this denial, concluding that under the plan “retroactive” benefits are unavailable and that the participant was properly notified of the plan amendment.

The participant filed a claim under ERISA §502(a)(1)(B) to recover the pension benefits. During a bench trial, the district court reviewed evidence outside of the administrative record that the plan’s benefits committee had considered in making its determination. The district court concluded the benefits committee abused its discretion when it denied the participant’s claim.

Extrinsic evidence

On appeal, the employer argued that because the district court was evaluating the benefits committee’s decision for abuse of discretion, the court should not have considered evidence not included in the administrative record.

The appellate court disagreed. A district court may consider evidence outside of the administrative record on an abuse of discretion review in an ERISA case, in particular when the evidence was known to the plan administrator when it rendered its benefits determination. To hold otherwise would allow plan administrators an unchecked opportunity to pick and choose what evidence in their possession to include in the administrative record. In addition, review of extrinsic evidence, such as the language of the plan and other factors, is necessary for courts to consider when determining whether a plan committee has abused its discretion.

In the case at hand, it was not reasonable for the benefits committee to conclude that plan language barred retroactive benefits. Further, the committee disregarded separate plan language giving the plan administrator broad authority to correct administrative error. In addition, the administrative record contained no corporate records supporting the committee’s conclusion that the participant had received notice of the plan amendment.

Reporting and disclosure

The appellate court also affirmed the lower court’s ruling that the employer violated ERISA’s reporting and disclosure provisions. Given conflicting evidence received at trial regarding the employer’s benefits communication procedures, it was not clearly erroneous for the district court to have determined the employer failed to send a summary plan description (SPD) to the participant.

Source: Helton v. AT&T, Inc. (CA-4).

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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