Recently, the United States Court of Appeals for the Eighth Circuit released an opinion which highlights the importance of ensuring ERISA plan documents grant plan administrators the discretion to construe and interpret the terms of the plan. In Hall v. Metro. Life Ins. Co., the Appeals Court dealt with a case in which a widow, Jane Hall, was appealing a district court’s decision to uphold MetLife’s determination that Jane Hall was not a beneficiary of her late husband’s life insurance policy.
Dennis Hall obtained a life insurance policy from MetLife through an employee benefit plan offered by his employer. The plan expressly provided MetLife with “discretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan.” In 1991, Dennis Hall completed and submitted a beneficiary designation form to MetLife naming his son as the beneficiary of his policy. In November, 2010, Dennis Hall completed and signed, but did not submit, a beneficiary designation form naming his wife, Jane Hall, as the sole beneficiary of his policy. After Dennis Hall’s death in 2011, MetLife distributed the proceeds of Hall’s life insurance policy to his son, on the grounds that the 1991 beneficiary designation was the most recent valid document naming a beneficiary, as the terms of the plan explicitly provided that beneficiary designation forms must be submitted to MetLife within 30 days of signature. When MetLife denied Jane Hall’s claim for benefits from the life insurance policy, she sued.
After the district court granted MetLife’s motion for summary judgment, one argument Jane Hall advanced on appeal was that MetLife abused its discretion by denying her claim because her husband had almost satisfied the requirements for effecting a change of beneficiary, and therefore the District Court should have applied the federal common law doctrine of substantial compliance to deem the signed, but not submitted, beneficiary designation form operative. While the Eighth Circuit was unsure if Jane Hall could raise the substantial compliance doctrine in the first place, it unequivocally asserted that in situations where an ERISA plan administrator has discretion to interpret the terms of the plan, the substantial compliance doctrine would not impede a plan administrator from requiring strict compliance with the terms of the plan. The Eighth Circuit acknowledged that in certain circumstances, such as interpleader actions, where “an administrator is granted no discretion and a denial of benefits is reviewed de novo, a reviewing court may look to federal common law to construe disputed terms in a plan” (internal quotations omitted). While the substantial compliance doctrine may be appropriate in some situations, “the doctrine does not operate to interfere with discretion granted to a plan administrator by an ERISA plan” and the fact that “a court may decide as a matter of common law to excuse technical non-compliance with the terms of an ERISA plan does not mean that an administrator with discretion under an ERISA plan is forbidden to enforce strict compliance with plan requirements” (emphasis in original). Based in part on its analysis of Hall’s substantial compliance doctrine argument, the Eighth Circuit affirmed the district court’s decision.
The Eighth Circuit’s interpretation of the law in Hall provides employers with a vivid example of the importance of ensuring their plan administrators are granted the discretion to interpret plan terms and determine eligibility for benefits. When plans explicitly provide administrators with such authority, the decisions of plan administrators will be granted much greater deference by the courts and increased protection from challenges based on federal common law.