Court Finds Plan Can Halt Erroneous Early Retirement Payout

August 5, 2003 ( - A retirement plan administrator's determination that a disabled participant could not receive benefits until the age of 65 was not "downright unreasonable."

>US District Judge George Marovich of the US District Court for the Northern District of Illinois found that even though the administrator had mistakenly paid the benefits to the participants after he turned 55, this still did not entitle the participant to benefit payouts before age 65, according to Washington-based legal publisher BNA.

>The court based its ruling on what it considered a reasonable interpretation of the plan by the plan administrator.   Under the retirement plan, participants were entitled to early retirement benefits if they were age 55 or over with 10 years of service.   However, in this case, the participant’s employment had ended at age 36, with less than 10 years of service, and the administrator reasonably applied the plan’s terms, the court said.

Benefit Payments

>James Sinclair worked for Delta Dental Plan from 1973 until he became disabled in 1981 at the age of 36. Under Delta Dental’s retirement plan, Sinclair continued to accrue years of service after his employment ended. The plan provided that participants who became disabled and unable to work could collect their accrued retirement benefits at age 65.

>In 1995, Sinclair inquired about possible eligibility to receive his retirement benefits at age 55.   Delta Dental informed Sinclair that he was not eligible for early retirement benefits and he would instead receive his retirement benefits when he turned age 65.

>Then, in 1997, Sinclair requested an estimate of his retirement benefits as of age 55. After Delta Dental give Sinclair a benefit estimate, Sinclair filled out a form electing to receive benefits at age 55.

>Delta Dental processed Sinclair’s request and began paying him benefits until it discovered its error several months later. However, after discovering its mistake, Delta Dental halted its payments to Sinclair and informed him that he would be eligible for his benefits when he turned age 65. Sinclair then sued Delta Dental, contending he was denied early retirement benefits in violation of ERISA.

The case is Sinclair v. Delta Dental Plan of Illinois Retirement Income Plan, N.D. Ill., No. 01 C 9202, 7/30/03.