SPD Language Not a Valid Plan Terms Change

A federal appellate court has ruled that a summary plan description (SPD) could not unilaterally grant a benefit plan administrator the right to make benefit eligibility decisions without having parallel language in plan documents. 

With that holding, the 8th U.S. Circuit Court of Appeals threw out a lower court ruling in a suit filed by a former game table dealer at the Harrah’s Casino in St. Louis who had challenged a decision by Prudential Insurance Company to deny him long-term benefits after becoming unable to work due to HIV, depression and fatigue in April 2004.  

Writing for the court, Circuit Judge Kermit Bye asserted that plaintiff Eric Ringwald was correct that a trial court judge should have used a more in-depth standard of legal review in eventually ruling for Prudential.  The lower court contended that the less rigorous review was appropriate because the plan’s SPD grants the “the sole discretion to interpret the terms of the Group Contract, to make factual findings, and to determine eligibility for benefits.”  

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The problem, Bye explained, is that benefit plans are required under the Employee Retirement Income Security Act (ERISA) to provide a plan amendment procedure and simply putting a plan change in an SPD does not constitute a valid change of plan terms under ERISA.  

Here, there are no terms in the plan which allow it to be amended by inserting into the SPD such critical provisions as the administrator’s discretionary authority to interpret the plan or to determine eligibility for benefits,” Bye wrote. “Indeed, this particular plan wholly fails to comply with (ERISA’s) requirement to include a procedure governing amendment of the plan.” 

Bye said the rule that an SPD prevails in the event of a conflict between it and plan documents only applies where doing so is necessary to protect plan participants.  

The case is Ringwald vs. Prudential Ins. Co. of Am. (8th Circ) No. 09-1933.