FactsIn this case a pension plan participant died leaving behind a pension plan benefit. The plan provided that the participant could designate a primary beneficiary and a secondary beneficiary. In this instance, the plan participant did designate his wife two times, but he did not designate a secondary beneficiary. His wife died before him. When the participant died, he was survived by two step sons who claimed to be close to the participant. However they were never adopted nor designated as beneficiaries.

The plan had a provision stating that if there is not a valid beneficiary designated at the time of the participant’s death then the money would go first to the surviving spouse, second to surviving children, third to surviving parents, fourth to the surviving brothers and sisters, and fifth to the executor administrator of the members estate. In this instance the money was disbursed to the surviving brothers and sisters of the participant.

Analysis

The trial court ruled for the two step sons who claimed they were equitably adopted and were very close to the participant as if they were his real children. They also argued that the term “children” in the plan was broad enough to include step children. The 5th Circuit however reversed finding that the trial court should have analyzed this matter using three factors regarding any plan interpretation issue under ERISA which are:

  1. Whether the plan administrator had given the plan a uniform construction;
  2. Whether the pan administrator’s interpretation is consistent with a fair reading of the plan;
  3. Whether different interpretations of the plan would result in unanticipated costs.

The 5th Circuit held that an analysis using these factors revealed no error in the plan administrator’s interpretation. The court noted that many plan participants would not necessarily expect step children to benefit from the plan and that the plan administrator was properly focused on providing a uniform interpretation that would avoid unanticipated costs such as investigatory costs. The court also found that the doctrine of equitable adoption had no broader application than in an estate matter. It did not create a legal parent/child relationship. The trial court’s decision was reversed. The step sons lost.

Lessons Learned

The Courts give broad discretion to a plan administrator usually. This right to interpret the plan will be in most plan documents. When you have a denied pension claim request the full plan document and the summary plan description. Look for inconsistencies. Also compare the reasons for denial of your claim with other cases. In the 5th Circuit you will need such evidence. This case sets out the distinct factors that are used in a plan interpretation matter.