An ERISA-governed employee welfare benefit plan participant filed a request for extended long-term disability benefits. She received a denial of her request from the employer’s benefits department. The participant sued the plan and the plan administrator, arguing that she was entitled to extended benefits.
She also claimed the plan failed to provide her with timely copies of the plan and other documents that she had requested. The plan participant further argued that the employer’s benefits department had improperly decided her claim instead of the plan’s benefits committee, to which the plan gave discretionary authority to determine eligibility for benefits. Finally, she claimed that her claim was subject to a de novo standard of review by the court, rather than a much more stringent, arbitrary, and capricious standard of review.
The trial court ruled that the plan participant was entitled to extended long-term disability benefits. The court also agreed that the de novo standard of review should apply, as the plan’s terms did not allow delegation of decision-making authority on benefits eligibility to the benefits department. The court went on to rule that the plan failed to promptly provide the requested documents to the participant, and it imposed penalties on the plan administrator and awarded attorneys’ fees and costs to the participant.
On appeal, the U.S. Court of Appeals for the Sixth Circuit affirmed the trial court’s decision, agreeing with its conclusion that the de novo standard of review applied. Since the plan document did not permit the benefits committee to delegate eligibility decisions to the benefits department, its adverse decision was subject to de novo review. As a result, plan administrators should adopt and strictly follow delegation of authority procedures that fall within a plan’s terms to avoid the likelihood of a court using a de novo standard of review of an adverse benefit determination.
Likewise, the appellate court upheld the trial court’s imposition of penalties on the plan administrator for failure to provide documents to the plan participant as requested and in a timely fashion. This decision emphasizes the risk to ERISA plan administrators of the penalties resulting from failing to furnish requested documents promptly.
The case is Laake v. Benefits Committee, Western & Southern Fin. Group Co. Flexible Benefits Plan, 2023 WL 3559602 (6th Cir. 2023).
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