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You don’t need a Sherlock Holmes investigation to deny ERISA benefits

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in Employee Benefits Program,HR Management,Human Resources

A federal appeals court has made it harder for employees to challenge your decision to deny a benefit covered by the Employee Retirement Income Security Act (ERISA).

Yes, benefits administrators must still make a reasonable effort to gather the information they need to decide whether ERISA benefits are due. You don’t, however, have to conduct a wholly independent investigation into who is telling the truth.

Recent case: Eli Lilly and Company employed Kevin Schwing until he was fired for allegedly falsifying sales-call data. He applied for benefits under the Lilly Severance Plan, which is an ERISA-covered benefit.

The plan administrator investigated the circumstances and learned from Schwing’s supervisor and HR that Schwing had falsified the data and also had admitted as much to them.

Schwing argued that either there had been a mistake or he was being retaliated against for filing earlier grievances. The administrator turned down the claim, believing what others had said.

Schwing sued, alleging the administrator should have conducted a more thorough, independent investigation.

The 3rd Circuit Court of Appeals disagreed and said the investigation was adequate and not an abuse of discretion. (Estate of Schwing v. Lilly Health Plan, et al., No. 06-4671, 3rd Cir., 2009)

Final note: Ask your attorney to help you review your role as benefits administrator in light of last year’s U.S. Supreme Court decision in Metropolitan Life Insurance Company v. Glenn. You may now be able to spend less time sorting through evidence and conducting investigations.

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