U.S. Supreme Court Orders More Respect Shown for Plan Admins

April 21, 2010 (PLANSPONSOR.com) – The U.S. Supreme Court has ruled that pension plan administrators deserve a bit more respect for their plan document interpretations than they have been getting in some courts.

The high court’s decision came in Sally L. Conkright et al. vs. Paul J. Frommert et al., a case involving a participant challenge to a Xerox Corp. pension plan and how it calculated current benefits after workers left the company, took distributions, but were later rehired.

In a 5 to 3 vote with Justice Sonia Sotomayor not participating, the court overturned a ruling by the 2nd U.S. Circuit Court of Appeals, which held in 2008 that a trial court judge is not required to defer to a plan administrator’s reasonable interpretation of the plan’s terms if the administrator arrived at the conclusion outside the context of an administrative claim for benefits. Justices ruled that the District Court judge should have reviewed the case by applying more deference to the administrator’s interpretation after the case had earlier gone to the appellate court and had been sent back to the lower court judge (High Court Accepts Xerox ERISA Case for Review).

“We held in Firestone Tire & Rubber Co. vs. Bruch…that an ERISA plan administrator with discretionary authority to interpret a plan is entitled to deference in exercising that discretion,” Chief Justice John Roberts wrote for the majority. “The question here is whether a single honest mistake in plan interpretation justifies stripping the administrator of that deference for subsequent related interpretations of the plan. We hold that it does not.”

The Supreme Court opinion is at http://www.supremecourt.gov/opinions/09pdf/08-810.pdf.