The plaintiff, Nerses Meguerditchian, was initially employed by FedEx in 1991 as a technician who repaired vehicles and ground equipment operated by the company. In 2011, the plaintiff injured his back while working on a vehicle, but participated in FedEx’s temporary return to work program following his injury until April 2011 when he ceased working altogether. Aetna, the administrator of the plaintiff’s short-term disability benefits program, denied the claim as untimely because it was submitted 99 days after the start of disability, and Aetna maintained that the claim had to be submitted within 60 days of the injury. The plaintiff appealed and outlined several reasons why he delayed submitting his claim; however, Aetna upheld its denial of benefits. Meguerditchian then filed suit; and the district court overturned the denial.
The court agreed with the plaintiff’s contention that Aetna and FedEx failed to provide him with sufficiently clear and comprehensive guidance regarding when and how he was to report his disability. Thus, the court found an abuse of discretion due to defendants’ failure to comply with ERISA’s notice requirements.
Although the court rejected the plaintiff’s arguments that Aetna acted under a conflict of interest, even under an unmodified abuse of discretion standard, the court observed, “Even without enhanced skepticism, deference to the plan administrator’s judgment does not mandate that the plan prevails. Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 675 (9th Cir. 2011) (“‘Deference’ is not a talismanic word [ ] that can avoid the process of judgment.”).” The court further pointed out that “ERISA’s central policy goal is to protect benefit-plan participants. Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899, 904 (9th Cir. 2009); 29 U.S.C. § 1001(b).” In order to assure that goal is met, ERISA mandates that employers provide clear notice of plan requirements “‘to insure against the possibility that the employee’s expectation of the benefit would be defeated through poor management by the plan administrator.'” Massachusetts v. Morash, 490 US 107, 109 S. Ct. 1668, 104 L. Ed. 2d 98 (1989).” A key requirement is that plan participants are to be furnished with summary plan descriptions; and the ERISA regulations further provide:
Any description of exception, limitations, reductions, and other restrictions of plan benefits shall not be minimized, rendered obscure or otherwise made to appear unimportant. Such exceptions, limitations, reductions, or restrictions of plan benefits shall be described or summarized in a manner not less prominent than the style, captions, printing type, and prominence used to describe or summarize plan benefits.
29 C.F.R. § 2520.102-2(b). The SPD must also refer the participants to the page numbers where restrictions appear. The court found that time limitations fall within the notice and disclosure requirements since failure to meet a time limitation could result in a loss of benefits; and such information is a key requirement of what information must be contained in the SPD. The court also found that the “reasonable expectations” test is also applicable under ERISA.
Applying those principles, the court determined that it was unclear from the plan documents when a disability is deemed to have “commenced” for purposes of reporting a claim to Aetna. Moreover, the timing rules were deemed “inherently unclear” on account of the mandatory Temporary Return to Work program at FedEx, leaving the average worker unclear as to whether the disability must be reported as of the date of injury or the date the employee can no longer participate in the TRW program.
Discussion: This ruling is a gem. In addition to offering a reminder that the abuse of discretion standard is no rubber-stamp, the court’s focus on ERISA’s notice requirements cited sources that had not previously come to our attention. ERISA’s notice requirements are not given enough attention, but as this case teaches, with respect to timing requirements and other requirements that could potentially lead to a loss of benefits, the notice requirements and the principle of reasonable expectations should be the starting point for any case analysis.