Kagan’s Brief on Deference to Plan Administrator Under ERISA

Under the Employee Retirement Income Security Act (ERISA), it’s well settled that the administrator of a benefits plan governed by ERISA is entitled to significant deference in making decisions concerning the plan, unless a decision by the administrator is found to be arbitrary and capricious. In Conkright v. Frommert, the Xerox Corporation changed its pension plan. The plan administrator interpreted the changes, and this decision was challenged.

The district court ruled that the administrator’s decision was arbitrary and capricious and should be reconsidered. The Second Circuit Court of Appeals affirmed. The plan administrator reconsidered the matter and changed the earlier decision, a change unfavorable to employees covered by the plan. The district court once again considered the matter and, this time, refused to give deference to the administrator’s interpretation because of the administrator’s previous mistake. The Second Circuit affirmed.

When the case was appealed to the Supreme Court, Elena Kagan filed a brief as Solicitor General arguing that a plan administrator’s decision wasn’t entitled  to deference the second time around, when the administrator’s first decision had been rejected because of an abuse of discretion by the administrator. Rather, said Kagan, the courts should interpret the plan, giving no deference to the administrator’s second decision, even though this decision wasn’t arbitrary and capricious. Had Kagan’s argument been accepted, the administrator’s second decision, which was unfavorable to employees, would have been rejected.

In a 5-3 decision, the Supreme Court disagreed with Kagan’s argument. The Court noted that giving deference to a plan administrator’s decision is an important principle of the law under ERISA. The fact that an administrator makes a mistake the first time doesn’t mean that the administrator is stripped of deference for subsequent related interpretations of the plan. Therefore, the rulings of the lower courts which had denied deference to the administrator’s second decision were reversed.

For other posts on Kagan, click here, here, here, here, here, here, here and here.