We know that an ERISA plan administrator both administering and funding the plan is operating under a “structural conflict of interest.”  This “structural conflict of interest” may lower the deference a trial court will give to the plan administrator’s benefits decision.

So, ERISA plans frequently delegate a plan administrator different from the funding source of the plan to eliminate this structural conflict of interest.

But what happens if the plan administrator “consults with” the plan (with a separate funding source) in making benefit decisions?  Is that enough to create a structural conflict of interest anyway?  NO.

Here’s the case of Day v. AT&T Disability Income Plan, [PDF] __F.3d __, 2012 WL 5359628 (9th Circuit November 1, 2012)(plan administrator’s “consultation with plan” on benefits decision was insufficient to create a structural conflict of interest because there was no evidence that the plan “had any influence over” plan administrator’s decision making process).

FACTS: Day sought disability benefits under the AT&T ERISA plan, funded by AT&T.  The AT&T plan conferred full discretion to Sedgwick Claims Management as plan administrator.  Day disputed how Sedgwick calculated his benefit payments and sued.

ISSUE: Whether Sedgwick’s consultation with AT&T on benefits issues creates a structural conflict of interest, requiring heightened scrutiny of the benefits decision?

HELD:  Plan Administrator’s “consultation” with AT&T (that funded the ERISA Plan) does not create structural conflict of interest.

RATIONALE:  “Just because Sedgwick consulted with AT&T in responding to Day’s concerns about [the amount paid on benefit] does not show that AT&T had any influence over Sedgwick’s decision making process in that regard.”  OP. at 13047.

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Photo of Mike Reilly Mike Reilly

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment…

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

Small and large employers retain Mike for his strategic advice and decades of experience in employment issues and litigation, business decisions and litigation avoidance. Mike provides advice in claims involving discrimination, retaliation, wrongful discharge, disability accommodation, ERISA and non-ERISA employee benefit claims, and wage/hour claims. He served as lead counsel in an employee raiding/trade secret case as reported in the Wall Street Journal, and defends employers in class action claims.

Mike’s remarks on employment issues have been quoted in NewsweekCorporate Legal TimesSeattle TimesEmployee Relations Law JournalPuget Sound Business JournalCFO.com, and other professional journals and management publications. Chambers USA’s Guide to America’s Leading Lawyers for Businessrates Mike in the top ranking (band one) for his work in labor and employment law, and has described him as “one of Seattle’s top-rate attorneys” who is “truly phenomenal [with] superb legal instincts” and “an amazingly assertive litigator.” His clients include Nordstrom, Seattle Seahawks, Home Depot, KeyBank, Starbucks, Fred Hutchinson Cancer Research Center, Red Robin and Seattle Chamber of Commerce, among others.