In a decision highlighting the importance of considered plan design and documentation, the Ninth Circuit ruled that a grant to the plan administrator of discretionary authority to interpret plan terms in the plan’s summary plan description (“SPD”), but not in the plan document itself, was insufficient to bestowFirestone deference.  Prichard v. Metropolitan Life Insurance Company, 2015 BL 112847 (9th Cir. 2015).

The issue arose from a denial of long-term disability benefits under IBM’s LTD Plan, which Metlife both insured and administered.  After Plaintiff applied for and received benefits under the LTD Plan, Metlife determined that a twenty-four month benefit limitation in the LTD Plan applied.  Ultimately, Plaintiff sued.

Metlife argued that its decision should be reviewed for an abuse of discretion based on the following language in the LTD Plan’s SPD: “Plan fiduciaries shall have discretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits.”  Language typically found in an SPD.

Citing Amara, Plaintiff countered that because the terms of the SPD were not plan terms they could not be enforced and that Metlife’s benefits denial should be reviewed under a de novo standard.  The district court, finding that the SPD was the governing plan document, applied an abuse of discretion standard and found in Metlife’s favor.

The Ninth Circuit disagreed and found that the district court should have applied de novo review of Metlife’s benefits denial.  The Court based its decision on its finding that the only plan document in the record was the insurance contract and that did not grant discretionary authority to Metlife. 

 The Prichard decision serves as a reminder to plan sponsors that all important plan provisions must not only be described in the SPD, but included in the plan document itself.  Plan sponsors may address this issue in a number of ways, including: (i) having a combined plan document/SPD, when appropriate; (ii) incorporating the SPD into the plan document; or (iii) including parallel language in the plan document and the SPD.