Supreme Court Considers Conflict for Plan Administrators That are Also Payers

May 5, 2008 ( - The U.S. Supreme Court heard oral arguments on a case to determine how much the conflict of a dual role of a plan administrator that is also a payer of benefits should be considered when reviewing the administrator's denial of benefits.

In reviewing the case of Metropolitan Life Insurance Company, et. al. v. Wanda Glenn, Amy K. Posner, attorney for MetLife, said the 6th U.S. Circuit Court of Appeals was wrong to hold that a company that determines benefits eligibility and that separately funds the plan’s benefits must always be deemed to be operating under a conflict of interest that changes the employer’s designated standard of review under the plan document. Posner argued that a court must consider that a plan administrator cannot make a determination that a participant is disabled out of the context of the plan design.

Justice Ruth Bader Ginsburg questioned the relevance of the plan design when, in this case, the administrator helped the participant obtain a determination of being disabled from the Social Security Administration and following the determination, decided Glenn was not disabled and terminated her benefits. In such a situation Ginsberg asked why a district court should not be skeptical of the reason for a plan administrator’s decision that seems to totally conflict with the government’s decision.

Justice David Souter suggested a court apply a “reasonableness” analysis to the plan administrator’s decision in denying benefits, and when that analysis “ results in something close to equipoise, then we take the structural conflict into consideration; and that’s what, in effect, sort of breaks the tie.”

Chief Justice John Roberts warned that the decision could have significant ramifications on Employee Retirement Income Security Act (ERISA) plans, discouraging the provision of benefits if it is decided courts should place undue weight on the roles of administrators.

A transcript of the April 23 oral arguments is here .

According to the Society for Human Resource Management (SHRM), the case before the U.S. Supreme Court was brought by Glenn, a Sears, Roebuck sales employee who began receiving long-term disability benefits after having heart trouble. At the direction of MetLife, Glenn sought, and qualified for Social Security disability.

After she qualified for Social Security benefits, Glenn reimbursed MetLife for $13, 502.50. MetLife then terminated its benefits to Glenn - a determination based in part on a check mark on MetLife's evaluation form indicating that she could return to work, SHRM said.

Glenn sued MetLife for violations of ERISA, and a district court denied her motion for judgment. However, the 6 th U.S. Circuit Court of Appeals reversed the district court's decision and ordered a reinstatement of Glenn's benfits.

According to the 6 th Circuit decision, more detailed medical reports showed that Glenn continued to be disabled. The appellate court criticized MetLife for "inappropriately selective consideration" of her medical record and said that MetLife acted under a conflict of interest, according to SHRM.

The Supreme Court expects to decide on the case in the 2007-2008 term, which concludes this summer.

The 6 th Circuit's opinion in the case is here .