Is heightened scrutiny of the benefits decision required when the plan administrator consults with the plan’s funding source? - Burke Harvey, LLC | Injury & Accident Lawyers in Birmingham, Alabama

Is heightened scrutiny of the benefits decision required when the plan administrator consults with the plan’s funding source?

In the recent decision of Day v. AT&T. ___F. 3d ___ , 2012 WL 5359628 (9th Cir. November 1, 2012), the Court determined that a plan administrator’s consultation with the plan’s funding source does not create a structural conflict of interest.  In this case the plaintiff disputed how Sedgwick calculated his benefit payments under the AT&T ERISA plan and filed suit. AT&T funded the plan but conferred full discretion to Sedgwick as plan administrator.  Under ERISA, plan administrators both administering and funding the plan operate under a “structural conflict of interest” which requires heightened scrutiny of the benefits decision.  Although the Plan in this case delegated a plan administrator separate from the funding source, the Court had to determine whether a structural conflict of interest could be found when Sedgwick, the plan administrator, consulted with AT&T, the funding source, on benefits issues.  The court found that it did not; stating, “Just because Sedgwick consulted with AT&T in responding to Day’s concerns…does not show that AT&T had any influence over Sedgwick’s decision making process in that regard.”

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