Companies that self-administer their Employee Retirement Income Security Act (ERISA), take note: Because your benefits decisions carry an implied conflict of interest (since rejecting a request for benefits such as retirement or payment of a medical bill means spending fewer company assets), courts expect your decisions to be transparent and based on good documentation.
Recent case: Robert Horne worked for FedEx. He and his wife applied for retirement benefits under FedEx’s ERISA pension plan. Workers who had been permanent employees before Jan. 1, 1988, needed just 10 years’ service to qualify, while those employed after that date needed 20 years’ service. FedEx’s plan was self-funded, and the company administered the plan itself.
Horne claimed his hire date was in October 1987, when he began part-time work. He went full time, permanent in March 1988, according to the employer’s computer records. The administrator refused to approve benefits, reasoning that Horne didn’t meet the 20-year requirement.
Horne sued, alleging that an inherent conflict of interest required the employer to interpret any plan language in favor of the employee whenever there was any ambiguity.
The court agreed in principle, reasoning that it would consider the apparent conflict of interest when deciding whether the administrator’s decision was reasonable.
But then the court went through the documents and decided that the terms were clear—Horne wasn’t a permanent employee until March 1988. (Horne, et al., v. FedEx, No. 5:07-CV-249, ED NC, 2008)