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.