The Court of Appeals for the Sixth Circuit recently upheld a district court’s ruling that a plan administrator did not act arbitrarily and capriciously in determining that an employee elected to have his benefit calculated under the account balance method offered by the plan. In 1999, the employer in this case amended its defined benefit pension plan to allow employees to make an irrevocable election to have their future pension accruals determined according to an account balance method. Before the amendment, all benefits were calculated using the final average pay method. Any employees who failed to make the election to switch to the account balance method by April 30, 2000, would continue to have their benefits calculated under the prior method.
In early 2000, the employee in question attended an informational meeting covering the election and the process for making the change. Employees were informed that they could make an irrevocable election to have their benefits calculated under the account balance method by calling the plan’s third-party administrator. The employee was moved to the account balance method on April 27, 2000, after making several phone calls to the third-party administrator.
In 2010, in connection with his retirement planning, the employee questioned the calculation of his retirement benefits under the account balance method and requested that the benefits committee recalculate his benefits under the final average pay method. The benefits committee denied the request, based on evidence of his 2000 election to switch to the account balance option. Following the employee’s formal appeal of the decision, the committee investigated further, eventually affirming its determination that the employee had properly made an election to change methods. After exhausting his administrative remedies, the employee sued under ERISA to have his benefit calculated under the original final average pay method. The district court granted summary judgment to the plan, finding that the committee’s decision was reasonable.
Pointing to plan language giving the administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan, the appeals court applied the deferential “arbitrary and capricious” standard in upholding the district court’s decision. In evaluating the committee’s review process, the court found that the committee’s process was reasoned and took into account all available evidence in reaching its decision. The court pointed to phone logs, a letter from the third-party administrator confirming the employee’s election, annual statements referencing his “Account Balance Option,” and other documentation in support of the plan’s contention that the employee properly and timely elected the account balance method. Further finding that the committee’s reliance on electronic records, account statements, and beneficiary designation forms in making its determination was neither unprincipled nor unreasonable, the appeals court upheld the committee’s determination that the employee elected to participate in the account balance program and is not entitled to have his pension benefits calculated under the alternative program. Durbin v. Columbia Energy Group Pension Plan (6th Cir. 2013)