Abstract
Subsequent to the Supreme Court’s 2008 decision in Metropolitan Life Ins. Co. v. Glenn, federal courts around the country have attempted to reconcile Glenn’s primary holding—that a structural conflict of interest exists (and must factor into the review) when an employer “both funds the [employee benefit] plan and evaluates the claims”—with prior circuit court precedent holding that no conflict of interest exists when employee benefits are funded through a trust. This article discusses how the law has developed on this issue, both pre- and post-Glenn, and analyzes how the issue may affect plan sponsors.
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References
1.
128 S.Ct. 2343 (2008).
2.
H.R. REP. No. 93-533 (1973), as reprinted in 1974 U.S.C.C.A.N. 4639, 4649.
3.
489 U.S. 101, 115 (1989).
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Id. (citing RESTATEMENT (SECoND) OF TRUSTS § 187, Comment d (1959)).
5.
885 F.2d 1180 (4th Cir. 1990).
6.
9 Fed. Appx. 147, 149 (4th Cir. 2001).
7.
509 F.3d 644, 650 (4th Cir. 2007).
8.
Post v. Hartford Ins. Co., 501 F.3d 154, 164 n.6 (3d Cir. 2007) (noting that when employee benefits are paid out of a fully funded and segregated ERISA trust fund rather than an employers operating budget, no structural conflict of interest is created).
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115 F.3d 936, 940 (11th Cir. 1997).
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291 F.3d 1270 (11th Cir. 2002).
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490 F.3d 848, 856 (11th Cir. 2007).
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248 F.3d 206, 217-18 (3d Cir. 2001).
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420 F.3d 278 (3d Cir. 2005).
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246 Fed. Appx. 130 (3d Cir. 2007).
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934 F.2d 1452 (10th Cir. 1991).
16.
29 F.3d 1029 (5th Cir. 1994).
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486 F.3d 693 (1st Cir. 2007).
18.
444 F.Supp.2d 856, 869 (E.D. Tenn. 2006) ("LTD benefits are not paid directly by Bayer, but rather through a VEBA trust funded both by Bayer and employee contributions. This funding mechanism has been held to minimize a potential conflict of interest"), rev’d on other grounds, 275 Fed.Appx. 495 (6th Cir., Apr. 24, 2008).
19.
Case No. 08-1295, 2009 WL 1497493, *4 (4th Cir., May 29, 2009).
20.
542 F.3d 848, 858 (11th Cir. 2008) (cert denied Apr. 6, 2009).
21.
Accord, Townsend v. Delta Family-Care Disability and Survivorship Plan, Case No. 08-11340, 2008 WL 4507571, *3-4 & n.1 (11th Cir. Oct. 8, 2008). ("The payments into the benefits trust, however, were periodic and non-reversionary. The Committee incurs no direct expense as a result of granting benefits nor does it profit from the denial or discontinuation of benefits, and therefore does not operate under a conflict of interest.")
22.
Peterson v. Principal Financial Group, Case No. 07-01741, 2008 WL 4630576, *6 (D. Colo., Oct. 17, 2008) (post-Glenn case where benefits funded by a trust: "Any funds not paid due to the denial of a claim do not enrich the administrator or the employer, but rather remain in the trust. . . . While [the employer] would ultimately be responsible for ensuring benefits payments in the event of a shortfall in the trust, such a connection is too tenuous to raise the possibility of conflict above the speculative level.").
23.
544 F.3d 1016, 1026 (9th Cir. 2008).
24.
305 Fed. Appx. 896, 902-03 (3d Cir. 2009).
25.
Case No. 08-2544, 2009 WL 936611(C.D. Cal. Apr. 6, 2009).
26.
Meyer v. DaimlerChrysler Corp., No. 08-0533, 2009 WL 702817 (E.D. Mo. Mar. 16, 2009) (disability retirement benefits under a pension plan established pursuant to a collective bargaining agreement between the defendant company and a union, funded by defendant and administered by defendant’s employees, creating a conflict of interest).
27.
Young v. Verizon’s Bell Atl. Cash Balance Plan, 575 F. Supp. 2d 892 (N.D. Ill. 2008) (putative class action alleging defendants used an improper formula in calculating pension benefits and those of other similarly situated employees; the court determined there was a conflict of interest because Verizon both sponsored and administered the plan, without discussing whether a trust alleviated the impact of the conflict).
28.
576 F.3d 240 (5th Cir. 2009).
29.
Case No. 09-3275, 2009 WL 2877933 (6th Cir., Sept. 10, 2009).
30.
Donald T. Bogan, ERISA: Re-Thinking Firestone in Light of Great-West-Implications for Standard of Review and the Right to a Jury Trial In Welfare Benefit Claims, 37 J. MARSHALL L. REV. 629, 640 (Spring 2004) ("[F]ederal courts continue to overlook the fundamental premise that unfunded and insured ERISA plans are not trusts"); John Langbein, The Supreme Court Flunks Trusts, 1990 SUP. CT. REV. 207, 208 (1990) (noting that unfunded plans are different in a crucial respect from other trusts: there is no neutral fiduciary in ERISA plans, because the employer "has continuing economic interests in the plans that it sponsors"); Barbara C. Long, Conflict of Interest and the Standard of Review in ERISA Cases: The Seventh Circuit’s Refusal to Acknowledge What Other Circuits Already Know, 1 SEVENTH CIR. REV. 152 (2006).