A recent ERISA case from the Fourth Circuit reaffirms that, sometimes, it is appropriate for a district court to consider evidence outside the administrative record in deciding whether the plan administrator abused its discretion in denying benefits. Here, the court upholds a judgment in the beneficiary’s favor holding that she was erroneously denied early retirement benefits that she only belatedly learned were available to her.
Helton v. AT&T Inc., No. 11-2153 (4th Cir. Mar. 6, 2013): The employee-participant Helton, age 55, left AT&T in 2001 without applying for retirement benefits because, under the plan -as far as she knew – she was too young to qualify. Unbeknownst to Helton, though, the plan had been amended to allow participants to qualify at her age. The reason she did not know was contested at trial, but the gist of the problem was that Helton was on leave from work at the time, and notice of the amendment may or may not have been mailed to her. The district court found on the record that AT&T was at fault for not delivering the necessary information about the amendment to Helton.
Upon discovering the amendment, Helton requested the benefits in 2009. She exhausted her internal plan remedies, then brought suit against the AT&T plan claiming that it “(1) improperly denied her retroactive benefits; (2) violated ERISA’s disclosure obligations by failing to inform her about the Special Update; (3) breached its fiduciary duty to keep her informed about her benefits under the Plan; and (4) failed to provide her with information she requested.” The district court dismissed the last claim, but found liability against the plan on the There claims.
The Fourth Circuit affirms.
A principal issue advanced by the plan on appeal was that while reviewing the plan’s decision to deny the benefits – a review performed under the deferential “abuse of discretion” standard – the district court erred in considering record evidence that was not part of the administrative record. It is a common part of the case law under ERISA that the district court is limited to the administrative record that was actually before the plan administrator. Yet the panel holds that this standard has often been misunderstood, and that outside evidence may be admissible: “we have refused to consider extrinsic evidence only in cases in which a plaintiff seeking benefits sought to first introduce evidence in federal court that was unknown to the administrator.” The proper standard is not what evidence already exists in the administrative record, but whether “a plan administrator . . . knew or should have known of certain pieces of evidence outside of the administrative record.” Such evidence, the panel holds, may be considered on abuse-of-discretion review.
The panel notes that if courts were rigidly limited to the administrative record, plan administrators would have the “unchecked opportunity to pick and choose what evidence in their possession to include in the administrative record” and “we would have effectively surrendered our ability to review ERISA benefits determinations because plan administrators could simply omit any evidence from the administrative record that would suggest their decisions were unreasonable.”
The court observes that, whatever doubt There was in the case law about the issue was resolved by Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008), which requires consideration of potential conflict of interest as part of the abuse-of-discretion review, which necessarily must include consideration of non-record evidence.
The panel notes two categories in particular that plan administrators might be deemed to know, whether in or outside the administrative record:
“First, relying on principles of agency, courts have found [admissible] ‘knowledge obtained by corporate employees acting within the scope of their employment is imputed to the corporation.’ [Citations omitted.] Second, because corporations are charged with knowledge of information known to their officers and because officers are charged with knowledge of information in corporate books and records, corporate entities also have constructive knowledge of the contents of their records. [Citations omitted.] Therefore, an ERISA plan administrator can be charged with knowledge of information acquired by its employees in the scope of their employment and the contents of is books and records.”
Under this standard, the Fourth Circuit upholds the district court’s consideration of information in the company’s records, and struck only the testimony of one witness who had left the company two years before Helton applied for benefits.
The court also holds that (1) the plan waived an argument that the district court should have remanded the denial of benefits to the plan committee by not presenting it to the district court; (2) the denial of benefits was inconsistent with the express terms of the retirement plan; (3) as further evidence of conflict, the plan administrator failed to compile an adequate record and the plan had a structural conflict (it both decided and paid benefits); (4) the district court did not clearly err in holding that AT&T failed to send Helton the 1998 SPD with the information she needed to apply for the benefit.
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