Verizon Can’t Cut Disability Benefits After Pension Rollover

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

Verizon Communications Inc. was wrong to cut an employee’s disability benefits by more than $1,300 per month to account for pension benefits the employee rolled into an individual retirement account, a federal appeals court ruled ( Thomason v. Metro. Life Ins. Co. , 2017 BL 247865, 5th Cir., No. 16-10634, unpublished 7/18/17 ).

Verizon and its claims administrator, Metropolitan Life Insurance Co., said the offset was justified by a disability plan provision that allows benefits to be reduced by pension payments that an employee “elected to receive.” The employee challenged this by saying he didn’t actually elect to receive the benefits—rather, he rolled a lump-sum distribution into an IRA in a trustee-to-trustee transfer.

The U.S. Court of Appeals for the Fifth Circuit sided with the employee July 18, saying the disputed provision was ambiguous and thus had to be construed in the employee’s favor.

In so ruling, the Fifth Circuit relied on its 2012 decision in Koehler v. Aetna Health Inc., which held that ambiguities in a summary plan description are resolved in favor of the beneficiary, even when the description is a verbatim copy of the plan. Because Verizon’s disability plan gave no indication as to whether a direct rollover qualified as “electing to receive” pension benefits, the Fifth Circuit found the phrase ambiguous and construed it in favor of the employee.

The court clarified that it wasn’t deciding the actual meaning of “elect to receive” under the Verizon plan. Instead, the court determined that the phrase was ambiguous, which meant that the employee’s interpretation—that he hadn’t “elected to receive” benefits that were still held in an IRA—carried the day.

The unpublished decision was joined by Judges Thomas M. Reavley, Jennifer Walker Elrod, and James E. Graves Jr. It affirms a 2016 district court ruling awarding the employee $88,889 in retroactive benefits and prejudgment interest.

Johnson Law Firm represented the employee. Estes Thorne & Carr PLLC represented Verizon and MetLife.

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

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Pension & Benefits Daily