Court Rules for Employer with no Evidence of Benefits Eligibility
February 21, 2012 (PLANSPONSOR.com) – A federal appellate court ruled in favor of an employer that denied a claim for retirement benefits by a former employee’s sister because it found no evidence of the employee’s entitlement to benefits.
The 1st U.S. Circuit Court of Appeals said it cannot find that the plan administrator’s denial of benefits was arbitrary, capricious or an abuse of discretion because the claim of benefits for Lorna Hutcheon is largely based on speculation and hearsay, and because of the scarcity of evidence as to Hutcheon's eligibility under the plan, the plan's demonstrated effort in researching the claim, and its plausible explanation for Hutcheon's ineligibility. The appellate court affirmed a lower court’s grant of summary judgment in favor of Marsh & McLennan.
The 1st Circuit found the plan administrator's decision to deny the claim was measured and well considered; the plan exerted substantial effort researching the claim and searching for evidence of Hutcheon's purported entitlement, as evidenced by the correspondence between Marsh & McLennan and Joan Kingsbury, Hutcheon’s sister, and her husband, and it received and considered evidence from the Kingsburys supporting Hutcheon's entitlement. Joan Kingsbury argued that there is no conclusive evidence supporting the plan's determination, but the court said it is not surprising that the plan does not have any documentation some 30 years after Hutcheon ceased employment, indicating that either she no longer was eligible for benefits, or never was eligible in the first place.
Joan Kingsbury cited statutory authority to support her argument that the plan, as a fiduciary, was required to maintain complete and accurate records, but, according to the court, that statute requires a plan to maintain certain records relating to plan participants for only six years. Moreover, the plan enumerated many reasons why Hutcheon may not have a current entitlement to benefits; for example, she may have already received a distribution of her plan contributions or benefits. “Notably, none of the competent evidence presented by the Kingsburys establishes that Hutcheon was eligible to participate in the plan, was vested in the plan, was entitled to a plan benefit at any point, or had not already received any benefit due to her,” the court said in its opinion.