Compliance August 7, 2009

No Payment for Employee Who Died before Request was Received

August 7, 2009 (PLANSPONSOR.com) - The 3rd U.S. Circuit Court of Appeals has ruled that a plan administrator did not abuse its discretion in denying a disability retirement benefit payment to an employee who died before his payment application was received.
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In its opinion, the court said the plan explicitly granted the Committee the authority to create a requirement for receipt of the application before death and the requirement is not an unreasonable interpretation of the plan. “[T]he Committee has consistently applied the receipt requirement, it does not conflict with the Plan, and it is consistent with both the Plan and ERISA’s statutory provisions,” the court said.

The appellate court also determined the Summary Plan Description for the plan does not conflict with the main plan document, which is silent as to how applications may be presented to the company. It rejected widow Rosann Delso’s argument that the language of the SPD constitutes a reduction of rights or benefits, pointing out that it merely sets forth the procedures to be followed for presentation of a claim, as it is required to do by statute.

According to the opinion, James Delso was an hourly employee at Merck & Co. when he died suddenly on December 26, 2002, at 6:14 a.m. On December 24, 2002, while hospitalized, he signed a letter-application declaring his intention to go on disability retirement immediately and requesting a lump sum payment of his pension under the Retirement Plan for the Hourly Employees of Merck & Co. Mr. Delso’s union representative, delivered the application to Merck Human Resources on December 26, 2002, at 4:25 p.m., after Delso’s death.

The plan’s SPD included a rule that an application was considered received if it was (1) received by employee services by mail, delivery, or fax before the participant’s death; (2) mailed to employee services and postmarked before the participant’s death; or (3) received by a designated human resources employee before the participant’s death.

Mrs. Delso argued that the receipt requirement was unenforceable because it was contained in the
SPD but not in the plan itself and also because the committee’s interpretation of the plan was unreasonable. She argued that because of the Christmas holiday, she had no way to contact the company prior to her husband’s death and that she had done all she could do.

The 3 rd Circuit opinion is here .

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