Lincoln National Ducks Political Consultant’s ERISA Lawsuit

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Lincoln National Life Insurance Co. escaped a proposed class action accusing it of shortchanging people’s disability benefits to account for money they received from other sources ( Barber v. Lincoln Nat’l Life , W.D. Ky., No. 3:17-CV-00034-JHM, 5/16/17 ).

Lincoln properly offset a former lawyer’s disability benefits to account for money he received as a freelance political consultant, a federal judge ruled May 16. The lawyer argued that Lincoln wrongly offset his benefits before he reported this consulting income for tax purposes—a practice he said affects beneficiaries across all Lincoln-issued disability policies. The judge rejected this claim because the lawyer hadn’t first raised it through Lincoln’s internal procedures.

In finding the lawsuit barred by the Employee Retirement Income Security Act’s administrative exhaustion requirement—which generally forces participants to submit benefit claims to the plan before heading to court—the judge considered an issue that has split the federal circuit courts. The Third, Fourth, Fifth, Sixth, Ninth, Tenth and D.C. circuits—along with the Department of Labor—say the exhaustion requirement doesn’t apply to claims alleging statutory violations of ERISA. The Seventh and Eleventh circuits have taken the contrary position.

In this case, the judge said the exhaustion requirement applied because the lawyer’s lawsuit was “merely an attempt to dress up claims for violations of the policy as statutory claims under ERISA.”

The judge refused to give the lawyer another opportunity to advance this claim, saying that he had already missed the policy’s 180-day deadline for filing an internal appeal.

Chief Judge Joseph H. McKinley Jr. of the U.S. District Court for the Western District of Kentucky wrote the decision.

Stites & Harbison PLLC represented the lawyer. Bradley Arant Boult Cummings LLP represented Lincoln National.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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