Court Upholds Early Retirement Denial for Employee on LTD

August 30, 2005 ( - The US 3rd Circuit Court of Appeals reversed a lower court ruling that an employer arbitrarily denied early retirement benefits to an employee who was on long term disability (LTD) leave, based on its previous decisions to grant early retirement to two other employees who were on a short term medical leave.

In the case of Vitale v. Latrobe Area Hospital, Circuit Judge Gary Lancaster ruled that the employer’s retirement plan language required Latrobe to deny early retirement benefits to Joyce Vitale because she was on LTD and not actively accruing benefits when she requested early retirement.   Vitale had argued that Latrobe’s denial was arbitrary and capricious because it had granted early retirement to two other employees who were on disability leave.

In his opinion, Lancaster pointed out that, even if Latrobe had mistakenly granted early retirement to two employees in a similar situation as Vitale, they would not be required to repeat the mistake.   Instead, under ERISA, they would be required to correct the plan for benefits mistakenly paid, not mistakenly pay out more benefits to Vitale.

In July 1999, Vitale went on short term disability leave due to injuries received in a car accident.   After 90 days, in September, she was placed on LTD.   In February of 2000, Latrobe amended its retirement plan to encourage employees to retire early, but excluded those employees who were not actively employed or actively accruing benefits.   So, when Vitale applied for early retirement, it was denied.

Meanwhile, two other employees who were on short term disability were granted early retirement benefits.   Latrobe argued that those two employees were considered to be actively accruing benefits because they were protected under the Family and Medical Leave Act (FMLA).

In his opinion, Lancaster said that, Latrobe’s interpretation of the other two employees’ situations was rational, even if it was erroneous.Therefore their situation was not the same as Vitale’s.   Nonetheless, he said that Latrobe’s denial of Vitale’s early retirement was correct based on the plan’s language, so the argument for benefits based on the treatment of the other two employees was moot.