The phrase “total and permanent disability” can be subject to multiple meanings, as a recent ruling from the 7th U.S. Circuit Court of Appeals pointed out.

In Tompkins v. Central Laborers’ Pension Fund, 2013 U.S.App.LEXIS 5161 (7th Cir. March 13, 2013), the appellate court determined that, even in the face of ambiguity, a pension plan administrator offered an interpretation of that phrase which was reasonable and within the scope of his/her discretionary authority when interpreting the plan.

The case concerned Donald Tompkins, who, while working as a laborer, participated in a pension fund maintained on behalf of multiple employers and his union, beginning in 1978. In 1999, Tompkins filed an application for a disability pension from the fund, alleging total and permanent disability on account of chronic asthmatic bronchitis, which he developed as a result of inhaling cement dust for 22 years.

Shortly before the plaintiff applied for benefits, the pension plan was amended to define “total and permanent disability” to “mean that the employee is totally and permanently unable as a result of bodily injury or disease to engage in any further employment or gainful pursuit as a laborer or other building trades crafts employment in the construction industry for remuneration or profit, regardless of the amount, or unable to engage in further employment or gainful pursuit of non-laborer or other non-building trades crafts employment for which the employment is considered full time and a primary source of income.”

The definition further stipulated, though, that a disabled laborer could earn up to $14,000 per year in a non-laborer or non-building trades crafts employment and still qualify for benefits. Tompkins was apparently not provided with a copy of the amendment, however.

Tompkins’ application for benefits was approved and he was paid through May 2007, when the fund suspended his benefits after learning he had been paid $10,550 in 2005 and $22,100 in 2006 while working for a construction contractor.

The fund also demanded that Tompkins repay benefits for those years due to wages he received while he was simultaneously being paid disability pension benefits. The district and appellate courts upheld the fund’s determination under an arbitrary and capricious standard of review, despite the plaintiff’s claim that the Supreme Court had ruled that a trustee could be stripped of deference “when he does not exercise his discretion honestly and fairly.” Conkright v. Frommer, 130 S. Ct. 1640, 1651 (2010). The court deemed Tompkins’ bad faith argument “meritless,” finding no support whatsoever for his claim the fund had acted dishonestly.

The court also rejected Tompkins’ argument that the fund was acting under a conflict of interest since the fund’s trustees were equally comprised of union and management representatives and the determination was unanimous.

Tompkins nonetheless argued that a conflict existed because the trustees were concerned about the financial status of the plan. The court found the evidence supporting the alleged conflict either predated the determination by four years or postdated the determination by two years. Thus, the evidence was deemed too weak to raise more than a mild concern regarding partiality, leaving the court “more than enough room to take Tompkins’ concerns into account while still granting the [f]und’s trustees the appropriate amount of deference.”

Turning to the merits, the court found the fund’s actions were reasonable and that the fund did not act in an arbitrary and capricious manner. The dispute turned on the phrase “[f]or such” in the following provision of the plan:

“A total and permanent disability shall mean that the employee is totally and permanently … unable to engage in further employment or gainful pursuit of non-laborer … employment for which the employment is considered full time and a primary source of income. For such non-laborer … employment … the participant may earn up to $14,000 per calendar year in non-laborer … employment and be considered totally and permanently disabled.”

The fund conceded the term “for such” was ambiguous, but interpreted the term to be “a general reference to the type of work allowed in the $14,000 provision such that a participant can earn up to $14,000 through non-laborer employment and remain ‘totally and permanently disabled,’ but he cannot do so if he is employed as a laborer.”

The court found the fund’s interpretation a reasonable reading of the plan. Thus, since Tompkins was working as a laborer while simultaneously claiming total disability, he disqualified himself from eligibility to receive benefits irrespective of the $14,000 he was permitted to earn annually in non-laborer employment.

The court of appeals plainly recognized the plan’s purpose and that there is an obvious incompatibility between claiming to be totally disabled and working on a full-time basis. However, the question here was much closer, given the low amount of earnings received to supplement a disability pension that amounted to $2,115.43 per month.

Under the Social Security Act, which requires an inability to engage in any work of any kind in order to qualify for disability benefits, the law permits a non-blind wage earner to earn up to $1,040 per month in 2013 without forfeiting benefits (see cola/sga.html). However, while Tompkins’ earnings in 2005 would not have been considered gainful under Social Security standards, the Social Security Act does not govern this pension plan.

The plan’s internal rules prohibited a disabled participant from earning any income from employment within the jurisdiction of the fund while an individual was simultaneously claiming to be totally and permanently disabled.

Thus, the fund acted within its rights in disqualifying Tompkins and by seeking a refund of monies paid while he was simultaneously receiving disability benefits from the fund.

Related Articles

ERISA 2023 Year in Review

ERISA 2023 Year in Review

Introduction The Employee Retirement Income Security Act of 1974 (ERISA) [1] directly impacts the lives of most Americans, yet few are familiar with ERISA despite its governance of pensions and retirement plans, along with other employer provided fringe benefits such...

Verizon Benefits Ruling Clears up Lien Burden of Proof

Verizon Benefits Ruling Clears up Lien Burden of Proof

On Jan. 29, a judge in the U.S. District Court for the District of Rhode Island recently wrote an opinion in a sort of "man bites dog" Employee Retirement Income Security Act case, Verizon Sickness & Accident Disability Benefit Plan v. Rogers.[1] Rather than the...

Reservation of Rights: Disability Insurance Claimant Guide

Reservation of Rights: Disability Insurance Claimant Guide

Applicants for disability insurance can often receive a mystifying response to their claim for benefits, an approval under a “reservation of rights.” After submitting a claim and providing a treating doctor’s certification of disability along with other medical evidence supporting a favorable claim determination, the expectation is that the claim will be approved. […]