United States: Tenth Circuit Decision Puts New Emphasis On Including Discretionary Authority Language In Summary Plan Descriptions

The Tenth Circuit's recent split decision in M. v. Premera Blue Cross, No. 18-4098 (July 24, 2020), poses a significant threat to the deferential standard of review typically applied to benefit plan claim determinations, and imposes a new burden on plan administrators.

More than 30 years ago, the Supreme Court held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), that benefit denials are "reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Applying the Firestone doctrine, lower courts have consistently applied the substantially more deferential "arbitrary and capricious" or "abuse of discretion" standard of review to benefit denials when the plan at issue granted the plan administrator (or relevant fiduciary) discretionary authority consistent with the Firestone case.

The Tenth Circuit, in Premera, changes that standard.

Although the Court began its discussion by affirming the well-settled principle that "if a plan administrator enjoys discretionary authority under the plan, we apply a deferential standard," it applied a de novo review standard even though the plan document clearly conveyed discretionary authority to the plan administrator. The Court held that the plan administrator was not entitled to deference because the plaintiff participants lacked notice of the plan administrator's discretionary authority. The Court explained that, because the plan's summary plan description did not describe the discretionary authority and the participants were not provided with a copy of the plan document, they lacked notice of the plan administrator's discretionary authority. Although the summary plan description clearly stated that participants could request "all pertinent plan documents," that language was insufficient because it "did not suggest the existence of another document affecting judicial review."

In a strongly-worded dissent, Judge Allison Eid argued that the panel's requirement that plan administrators specifically inform participants that documents exist that could affect judicial review "is supported neither by the language of ERISA nor our caselaw; it is of the majority's own making." She also emphasized that there was no basis in Tenth Circuit law, or any other circuit's law, for the majority's new disclosure requirement.

Notwithstanding Judge Eid's well-reasoned dissent, it is now Tenth Circuit law that, in order to obtain deferential review, a plan administrator must either (i) furnish participants its plan documents-even if the participant has not requested them-or (ii) ensure that its summary plan description explicitly states that the plan administrator (or relevant fiduciary) has discretionary authority to determine benefits eligibility and construe the plan's terms. It remains to be seen whether other courts will adopt the Tenth Circuit's new notice requirement. However, plan administrators, particularly those in the Tenth Circuit, should review and revise their summary plan descriptions to ensure that participants have adequate notice of the plan administrator's discretionary authority.

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