In Newsom v. Reliance Standard Life Ins. Co., the Fifth Circuit clarified when it is appropriate for a district court to remand an ERISA dispute to a plan administrator for development of a merits record. 26 F.4th 329 (5th Cir. 2022). James Newsom suffered from a variety of maladies, and in September 2017 his employer reduced his schedule to 32 hours per week. In October 2017, Newsom’s schedule again was reduced to 28 hours per week, and he stopped working entirely on January 30, 2018. After Newsom filed a claim for disability benefits, Reliance Standard, the claims administrator, determined that his date of disability was January 30, 2018, and since he was working less than 30 hours per week at that time, he was not a full-time employee and did not qualify for long-term disability coverage. After Newsom sued, the district court determined that Newsom’s date of disability was October 2017, that Newsom was a full-time employee as of that date, and that he was eligible for long-term disability coverage. Accordingly, and without further analysis, the district court awarded Newson long-term disability benefits.

Reliance Standard appealed to the Fifth Circuit, which agreed with the district court regarding Newsom’s date of disabilit and eligibility for coverage but reversed the award of benefits and remanded to the claims administrator for further proceedings. The appellate court held that Reliance Standard had not made any merits determination regarding benefits; it had made only a determination that Newsom was not a full-time employee at the time of his disability, and therefore had not met the eligibility requirements and did not qualify for coverage. Once Reliance Standard determined that Newsom was ineligible for coverage, it ended the inquiry and did not develop any record regarding the merits of Newson’s claim. The court held that remand was necessary for Reliance Standard to develop a record and make an initial benefits determination — not, as Newsom claimed, to give Reliance Standard “second bite at the apple.” The Fifth Circuit emphasized that remand was consistent with its earlier holding in Vega v. Nat’l Life Ins. Servs., Inc., in which the court declined to remand to allow the administrator “to make a more complete record on this point.” Here, the issue was not that the existing record was incomplete, but that there was no record regarding the merits of Newsom’s claim at all.

The rationale underlying the Fifth Circuit’s decision is clear. A contrary ruling would compel claims administrators to make full merits determinations even where the participant did not qualify for coverage — and entail a significant waste of resources. After Newsom, however, an administrator that finds a claimant in the Fifth Circuit ineligible for coverage is permitted to end the inquiry there, without waiving its ability to fully assess the merits of a claim in the event the eligibility determination is overturned.