In a number of recent cases, courts have reminded litigants and practitioners that the focal point of any lawsuit under the Employee Retirement Income Security Act of 1974 (ERISA) for benefits purportedly owed under the terms of an employee benefit plan is the plain language of the plan itself. As the U.S. Supreme Court has noted on a number of occasions, “The plan, in short, is at the center of ERISA.” The courts’ continued tendency to view ERISA plans as quasi-contractual enables plan sponsors to dictate a variety of favorable litigation “ground rules” that participants must abide by in the event that they file suit for benefits under the plan. By ensuring that ERISA plans include the following five provisions, plan sponsors can significantly limit the risks and costs associated with ERISA benefit claims litigation.
1. Ensure a Deferential Standard of Review
Any discussion of the extent to which plan sponsors can tip the ERISA litigation scales in their favor must begin with the Supreme Court’s 1989 decision in Firestone Tire & Rubber Co. v. Bruch. In Firestone, the Court addressed a simple, yet fundamentally important, question: What standard of judicial review applies to benefit determinations under ERISA? Noting that the statute itself did not provide an answer, and rejecting the lower courts’ reliance on the Labor Management Relation Act’s arbitrary and capricious standard, the Court turned to the common law of trusts for guidance. Under trust law, the Court found, the standard of review depends upon whether the trust instrument gives the trustee discretion to construe disputed or doubtful terms. If it does, courts must defer to the trustee’s interpretation of plan terms and benefits eligibility decisions so long as they are not an abuse of discretion. If it does not, a de novo standard of review applies.
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