Craft & Sheppard's Supreme Court Review

Employee Retirement Income Security Act (ERISA)

ERISA regulates most employed sponsored plans for pension, retirement, and disability benefits.  For a generation, typically the High Court has strictly interpreted ERISA and sided with employers and their insurers over employees.  ERISA contemplates two types of pension plans: a defined benefit plan (guaranteeing a fixed retirement income at retirement based upon years of service and salary), and a defined contribution plan (retirement income is a function of the amount paid into the plan and its investment performance, the most common today).   In Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985), the Court ruled that a plan participant in a defined benefit plan could not sue a plan administrator, a fiduciary under ERISA, for damages from a delay in processing her claim. Here, in LaRue v. DeWolff, Boberg & Assocs., the plan administrator failed to honor the participant’s request in a defined contribution plan to make changes to his account as the plan permitted.  This failure costs the participant $150,000.  Under ERISA, § 502(a)(2), the Court ruled that a plan participant could sue the plan administrator for fiduciary breaches causing this type loss to his defined contribution plan.  Separately, in Metro. Life Ins. Co. v. Glenn, the Court ruled for the employee. When a plan administrator denies an employee’s disability benefits, he may seek judicial review, an administrative-type review.  The ERISA plan, however, may specify the Court’s standard of review, usually abuse of discretion.  Plan administrators often serve dual roles: evaluate and approve or deny claims and then pay (or not pay) benefits.  In fact, MetLife served a dual role, telling the employee to seek Social Security (SS) disability benefits and when she prevailed, backing benefits offset what it had paid her.  Later, in denying her claim for extended benefits, MetLife ignored the SS’s findings about her inability to work, emphasized a medical report that favored denial and de-emphasized others, and did not give its vocational and medical experts all relevant reports.  MetLife's inconsistent positions benefited it financially, were an important factor in its decision, and showed procedural unreasonableness.  Accordingly, the Court found the conflict justified, reversing MetLife’s decision to deny benefits.  The employee won.