Whether a retiree has "received" his pension benefits should be a simple question to answer. Right? Not always. It all depends on what you mean by "receive," as illustrated by the following case.
In Thomason v. Metro Life Ins. Co., No. 16-10634, 2017 U.S. App. LEXIS 12932 (5th Cir. July 18, 2017), Joel Thomason worked for Verizon Communications and participated in its long-term disability (LTD) plan and pension plan. Metropolitan Life Insurance Company (MetLife) was the claims administrator for the plans. In 2007, Thomason experienced health problems and became eligible for benefits under the LTD plan and pension plan. However, the summary plan description (SPD) for the LTD plan stated that LTD benefits would be reduced by benefits from the pension plan "if you elect to receive them." Not wanting to have his LTD benefits reduced, Thomason elected to take his pension benefits in the form of a lump sum that was directly rolled over from the pension plan into his individual retirement account (IRA). Thus, Thomason never touched any of the pension money and, in his mind, this meant that he had elected to NOT "receive" any of the pension money.
Metlife concluded otherwise and determined that Thomason DID elect to "receive" the pension money and, in fact, received it via his IRA. Therefore, MetLife reduced Thomason's LTD benefit from $2,571.79/month to $1,251.96/month. Thomason administratively appealed this reduction, but MetLife upheld its offset decision; so, Thomason sued.
The district court and Fifth Circuit Court of appeals both ruled in Thomason's favor. The Fifth Circuit explained that the SPD was ambiguous as to what it meant by "if you elect to receive [the pension benefits]" and, therefore, the Court would apply the rule that ambiguities in a document are construed against the drafter. Because the SPD gave no indication as to whether a direct pension rollover to an IRA would constitute "receipt" of the pension by the participant, the Fifth Circuit held that the phrase "if you elect to receive [the pension benefits]" had to be construed in Thomason's favor. Accordingly, the Fifth Circuit held that the direct rollover of Thomason's pension into his IRA did not constitute a receipt by Thomason of benefits from the pension plan. Therefore, the offset to his LTD benefits was unlawful.
Although the ambiguity in the SPD in this case worked in the participant's favor, not all courts construe ambiguities in an SPD against the drafter. This is especially true where the SPD expressly states that the plan administrator has discretion to interpret ambiguities in that document. In any event, the odds of you prevailing on your pension claim will always be greater if your claim is based on clear and unambiguous plan language.
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