With Plan Restatement Inevitable,Keep Legal Standards of Review in Mind

Abstract

Employee benefit professionals will redraft certain benefit plan documents in the current calendar year to comply with recent changes in tax law and U.S. Department of Labor regulations. Such redrafting presents an opportunity to ensure that plan document language will invoke the most favorable judicial standard of review should the plan become the subject of a claim dispute. Generally, courts may impose one of two standards of review in deciding claim disputes. The “arbitrary and capricious” standard seeks to determine only whether the plan administrator acted within the provisions of the plan in denying a claim. The “de novo” standard gives courts greater latitude to decide disputes based on the merits of each side’s arguments. Where plan documents explicitly grant the plan administrator discretionary decision-making authority, courts will invoke the arbitrary and capricious standard of review. Benefit professionals must familiarize themselves with the issues and ensure that plan documents contain the correct language to invoke the most favorable judicial standard of review.