Alfieri v. Conkright; Conkright v. Frommert; Pietrowski v. Conkright

The Supreme Court has agreed to decide whether a U.S district court must defer to an ERISA plan administrator's "reasonable" interpretation of the terms of the plan if such an interpretation is reached outside the context of an administrative claim for benefits.

Nearly 100 Xerox employees and retirees who had worked for the imaging and printing company, left for a time and then were rehired, filed a lawsuit under the Employee Retirement Income Security Act of 1974. When they left the company, the workers received a lump-sum payment under the company’s Retirement Income Guarantee Plan. When they were rehired, they began earning benefits again.

The company has maintained that the lump-sum amount, plus interest, should be subtracted from the pension benefits of the rehired workers. That subtraction in some cases lowered pension values by hundreds of thousands of dollars. The group of employees sued in 1999.

The U.S. District Court for the Western District of New York entered summary judgment in favor of Xerox. The 2nd U.S. Circuit Court of Appeals reversed in part, ruling that a federal court plan to recalculate pensions for a group of current and former Xerox workers was valid, though the court also said that release forms some of those employees signed barred them from making claims.

"We find that the plan has not always contained a phantom account, that it was not properly added to the plan through amendment until 1998, that its application to employees rehired prior to 1998 violates ERISA's anti-cutback provision by impermissibly reducing their benefits, and that its adoption in 1998 was made without proper notice to plan participants," the court noted.

Question presented: Whether the statutory requirements for releases of claims under the Older Workers Benefit Protection Act are applicable to ERISA claims; whether Firestone deference applies to a plan administrator’s interpretation of benefits when issued outside of the administrative claims process; and whether a totality-of-the-circumstances test should be used to determine if an employee has “knowingly and voluntarily” waived pension benefits by signing a boilerplate release.

The Supreme Court held today that a U.S district court should have deferred to an ERISA plan administrator's "reasonable" interpretation of the terms of the plan if such an interpretation is reached outside the context of an administrative claim for benefits.

Nearly 100 Xerox employees and retirees who had worked for the imaging and printing company, left for a time and then were rehired, filed a lawsuit under the Employee Retirement Income Security Act of 1974. When they left the company, the workers received a lump-sum payment under the company’s Retirement Income Guarantee Plan. When they were rehired, they began earning benefits again.

The company has maintained that the lump-sum amount, plus interest, should be subtracted from the pension benefits of the rehired workers. That subtraction in some cases lowered pension values by hundreds of thousands of dollars. The group of employees sued in 1999.

The U.S. District Court for the Western District of New York entered summary judgment in favor of Xerox. The 2nd U.S. Circuit Court of Appeals reversed in part, ruling that a federal court plan to recalculate pensions for a group of current and former Xerox workers was valid, though the court also said that release forms some of those employees signed barred them from making claims.

"We find that the plan has not always contained a phantom account, that it was not properly added to the plan through amendment until 1998, that its application to employees rehired prior to 1998 violates ERISA's anti-cutback provision by impermissibly reducing their benefits, and that its adoption in 1998 was made without proper notice to plan participants," the court noted.

On April 21, 2010, the U.S. Supreme Court reversed and remanded the lower court order in an opinion by Chief Justice John Roberts.

"We held in Firestone Tire & Rubber Co. v. Bruch that an ERISA plan administrator with discretionary authority to interpret a plan is entitled to deference in exercising that discretion. 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 chief justice wrote for the majority.

Meanwhile, Justice Stephen Breyer dissented, joined by Justices John Paul Stevens and Ruth Bader Ginsburg. Justice Sotomayor took no part in the consideration of the case.

Question presented: Whether the statutory requirements for releases of claims under the Older Workers Benefit Protection Act are applicable to ERISA claims; whether Firestone deference applies to a plan administrator’s interpretation of benefits when issued outside of the administrative claims process; and whether a totality-of-the-circumstances test should be used to determine if an employee has “knowingly and voluntarily” waived pension benefits by signing a boilerplate release.