SPD Omission Not a Conflict with Plan Terms

Margaret A. Lipker contends that AK Steel’s calculation of her benefit is wrong because its construction and application conflicts with the terms of the governing SPD, according to a 6th U.S. Circuit Court of Appeals opinion. The SPD defines the surviving spouse benefit as “50% of the participant’s pension less 50% of the amount of widow’s (or widower’s) Social Security benefit or, if higher, a minimum benefit of $140 per month,” whereas language in AK Steel’s pension plan document says 50% of the participant’s pension will be reduced by 50% of the amount of the widow’s Social Security benefit “without regard to any offset imposed by law.”   

The court noted that “widow’s insurance benefit,” as used in the Social Security Act, is defined as equal to the primary insurance benefit of the deceased husband (in this case $1,469). However, the Act makes clear that a person who is entitled to an old-age benefit (as Lipker is) and any other monthly Social Security insurance benefit (such as a widow’s benefit), will not receive both benefits in full simultaneously. So, it offset Lipker’s widow’s benefit by the amount of Social Security she was receiving on her own. Lipker perceived a conflict because Social Security only paid her $458 as a widow’s benefit.  

The 6th Circuit pointed out that because employees rely on SPDs in making decisions about their future benefit needs, it has held that language in an SPD may control over any conflicting language in the employee benefit plan itself. “This does not mean, however, that an omission from the SPD will, by negative implication, be deemed to alter the terms of the plan itself,” the court said.  

The court determined that the omission from the SPD is not misleading, and the discrepancy between the language of the two provisions does not rise to the level of a “conflict.”