You probably already know that an ERISA Plan that fails to properly delegate administrative duties to another party may lose discretionary review.
But does the delegation of authority have to be in writing? Maybe not, so long as the Plan allows for delegation.
The recent case of Aschermann v. Aetna Insurance Company [PDF], __ F.3d__, 2012 WL 3090291 (7th Cir. July 31, 2012) gives a clue. The case also has some helpful discussion on the value of “boilerplate” in denial letters. (Kudos go to my friend, Mark Schmidtke, on a nice result).
FACTS: Aschermann was a pharmaceutical sales person with a bad back. She received 24 months of ERISA disability benefits under an “own occupation” provision. An Administrative Services Agreement delegated discretion to Aetna. Aetna, the plan administrator, concluded she could do sedentary work after 24 months and denied future disability benefits. There was discretionary language in the plan.
Aschermann contended: (1) denovo review should apply because Aetna was not properly designated in Plan documents as having authority to make benefit decisions; (2) she was denied a full and fair review because Aetna asked for new tests and medical information.
TRIAL COURT HELD: Discretionary review applied because Aetna had been properly designated with authority to make benefit decisions.
- Is a written delegation of administration of the plan effective? YES
- Is “boilerplate” language describing the appeal process, and the medical information needed for an appeal, effective? YES
SEVENTH CIRCUIT: AFFIRMS, with the following rationale:
- “[D]elegation does not depend on an express grant; instead it is permissible unless it would be ‘contrary to the public policy or the terms of a promise.’” Op. at 3
- “There is no reason why an employer cannot make a summary plan description be part of the plan itself and thus reduce the length of the paperwork and the potential for disagreement between the summary and the full plan[.]” Op. at 3
- Nothing in this plan forbids delegation [to Aetna]. A signed document captioned “Administrative Services Agreement” [effectively] transfers to Aetna all of Lumbermens’ day-to-day duties and discretion. Op. at 2. By delegating to Aetna, “Lumbermens has not done anything fundamentally different from choosing a particular working group within its internal hierarchy.”
- The delegation from Lumbermens to Aetna reduced any potential conflict. Lumbermens, as an underwriter, benefits when claims are denied…. Aetna, as a third party administrator, has no financial interest… Op. at 3.
- The denial letter offered a process to appeal the claim denial, and described the information needed for an appeal. “Language gets called “boilerplate” when it is used frequently….” “But formulaic [language] does not mean irrelevant.”
- Aschermann received a reasonable opportunity to supplement the file and receive a “full and fair review”….