Courts interpret pension plans in accordance with their terms and, therefore, will not deviate from them, even when the result seems harsh or unfair. Strang v. Ford Motor Co. General Retirement Plan, No. 16-2090, 2017 U.S. App. LEXIS 8849 (6th Cir. May 19, 2017) is a recent, albeit sad, example.

In Strang, John Strang had worked for Ford Motor Company for over thirty-eight years when he retired in 2007 and began receiving monthly pension benefits from Ford’s pension plan. In April 2012, Ford notified Mr. Strang that the plan was going to provide retirees with the option of taking their remaining pension benefits in the form of a lump sum. Ford explained that there would be a series of election periods in 2012 and 2013 and that Mr. Strang would be “assigned a specific election period based on a random process.”

In July 2012, Mr. Strang was diagnosed with terminal cancer. Thereafter, he and his wife contacted the Plan Administrator (PA) on numerous occasions, requesting that the PA expedite sending them the lump sum election forms. The forms were not sent. Rather, sometime before November 16, Mr. Strang received a postcard from Ford informing him that his lump-sum election period would be between December 14, 2012 and March 13, 2013. On November 16, 2012 Mrs. Strang called the PA requesting a rush on sending the lump sum election forms. Mr. Strang and Mrs. Strang, who had power of attorney for Mr. Strang, also sent two separate letters to Ford making this same request and explaining that Mr. Strang was on his death bed and wished to take the lump sum buyout. Two days later, Mr. Strang passed away never having received the lump sum election forms.

A few months later, Ford sent Mrs. Strang a letter informing her that Mr. Strang had not submitted a valid and completed lump sum election form during his election period, and that, because he died before his election period began, his attempt to elect the lump sum buyout via the November 16, 2012 letters was ineffective. Although Mrs. Strang retained the ability to take a lump buyout of her survivor’s portion of Mr. Strang’s pension, that amount was $463,254.78 less than the lump sum the Strangs would have received if Mr. Strang’s lump sum election had been effective. Mrs. Strang sued in federal district court to recover this amount, but the district court ruled for Ford.

On Mrs. Strang’s appeal, the Court of Appeals first noted that the lump sum election randomly period assigned to Mr. Strang was from December 14, 2012 to March 13, 2013. Therefore, Mr. Strang’s attempt to elect the lump sum buyout before December 14, 2012 via the November 16, 2012 letters was ineffective. The Court of Appeals added that, once Mr. Strang died on November 18, 2012, Mrs. Strang was unable to make the lump sum election for him because her power of attorney expired automatically upon his death. Finally, the Court of Appeals stated that Ford had no obligation to send the election forms in advance of the election period and that, contrary to Mrs. Strang’s claim, Ford had not acted in a discriminatory manner by randomly assigning Mr. Strang’s election period. For all of these reasons the Court of Appeals held that Ford’s interpretation of the plan and denial of Mrs. Strang’s claim was rational and legal under the plan’s buy out provisions.

The Court of Appeals did, however, acknowledge the harshness of the result: “It is true that the facts here present a tragic case of the sometimes difficult nature of hard-line rules, but there is nothing in the plan that prevents Ford from keeping its structured plan intact so that it could provide an orderly system for the many other retirees that may have wished to elect their own lump-sum option.”

While the hard-line rule that pension plans must be interpreted in accordance with their terms did not bode well for Mrs. Strang, the rule often works in favor of pension claimants who receive less than their benefit entitlement under the terms of their pension plan.

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