Yesterday’s Supreme Court decision in Conkright v. Frommert, Docket
No. 08-810 (U.S. April 21, 2010), confirmed the deference owed by courts to
administrators of ERISA benefit plans where the plan documents confer
discretionary authority on the plan administrator. Reversing the U.S. Court of
Appeals for the 2nd Circuit, the Supreme Court held that a “single honest
mistake in plan interpretation” did not strip a court of its obligation to defer
to a plan administrator’s interpretation of plan terms.
In Conkright, the Supreme Court emphasized that ERISA principles require
courts to afford ERISA plan administrators a broad standard of deference where
plan documents grant them discretionary authority. See Metropolitan Life Ins.
Co. v. Glenn, 554 U.S. ___ (2008); Firestone Tire and Rubber Co. v. Bruch,
489 U.S. 101 (1989).
Such deference, the Supreme Court reasoned, preserves the “careful balancing”
between ensuring fair and prompt enforcement of benefit rights and encouraging
employers to adopt benefit plans by promoting “efficiency, predictability, and
uniformity” in plan administration. Conkright also makes clear that a plan
administrator’s good-faith interpretations of plan documents are entitled to
deference regardless of the procedural context in which the interpretations
The plaintiffs in Conkright were former Xerox Corporation employees who
participated in a Xerox pension plan. They had previously terminated employment
with Xerox and received lump-sum distributions of accrued pension benefits.
After Xerox rehired the plaintiffs, they received credit for their prior years
of service to Xerox.
The Xerox pension plan provided that when a prior distribution of benefits
had been made to a participant, any subsequent distribution had to be offset by
the accrued benefit attributable to the prior distribution. The plan documents
granted the administrator broad discretionary authority to interpret the plan
and resolve ambiguities. Consistent with an unwritten past practice, the plan
administrator calculated the plaintiffs’ benefits following the second
termination of their employment using an offset formula based on a “phantom
account” to reflect their prior pension distributions. The plaintiffs objected
and ultimately filed suit.
The district court upheld the plan administrator’s calculations and the
plaintiffs appealed. The 2nd Circuit reversed, holding that: (1) the phantom
account formula was a “retroactive cut-back” of benefits, contrary to Section
204(g) of ERISA; and (2) employees were not given proper notice of the phantom
account formula in early versions of the summary plan description. The 2nd
Circuit directed the lower court to determine the plaintiffs’ benefits without
using the phantom account.
On remand to the district court, the plan administrator asserted that in
order to avoid paying duplicate benefits to the plaintiffs, the pension plan
should be interpreted to require that the benefits payable to each plaintiff
following his or her second termination be offset by the present-day economic
value (the actuarial equivalent) of the prior distribution.
The district court disagreed, holding that the offset should be based on only
the actual amount of each prior distribution, without regard to the time value
of money dating back to the time of such distribution. This time, Xerox
appealed, and the 2nd Circuit affirmed, ruling that: (1) the district court did
not need to defer to the plan administrator’s reinterpretation of the pension
plan; and (2) the district court had “discretion” to fashion a remedy based on
the lower court’s own interpretation of the plan. Xerox appealed the 2nd Circuit
decision to the Supreme Court.
Deference to Plan Administrator
The Supreme Court reaffirmed that courts should defer to a plan
administrator’s interpretation of plan documents, noting that deference is
supported by the purposes of ERISA and by principles of trust law. Writing for
the 5-3 majority, Chief Justice Roberts explained that the plan administrator’s
initial error in interpreting the plan document’s offset provision was a “single
honest mistake,” which did not destroy the deference owed to the plan
administrator’s subsequent interpretation of that provision.
The Supreme Court rejected the 2nd Circuit’s view that interpretations made
by a plan administrator in court proceedings or other contexts unrelated to
benefit claims were “mere opinion[s]” not entitled to deference. The Supreme
Court made clear that where the plan documents so provide, a plan
administrator’s good-faith interpretation of plan documents is entitled to
deference, regardless of the procedural context in which the interpretation
Although the Supreme Court rejected the 2nd Circuit’s
“one-strike-and-you’re-out” approach, the Supreme Court also cautioned that
“multiple erroneous interpretations,” even if made in good faith, might cause an
administrator to forfeit this deferential standard.
The plaintiffs and the Department of Labor, which filed an amicus brief
supporting the plaintiffs, argued that requiring courts to defer to plan
administrators who had made mistakes would encourage them to adopt unreasonable
interpretations in the first instance and frustrate the purposes of ERISA. The
Supreme Court described these concerns as “overblown,” noting that even under a
deferential standard, the law only required deference to “reasonable”
The Supreme Court reasoned that weakening ERISA’s deferential standard would
contradict important purposes of ERISA by fostering unnecessary litigation and
expense and “creat[ing] further complexity, adding time and expense to a process
that may already be too costly for many.”
Conkright Reconciles Conflicting Decisions from 2nd and 9th Circuits
The Supreme Court noted that, contrary to the 2nd Circuit’s decision, the 9th
Circuit had previously upheld Xerox’s method for calculating rehired Xerox
employees’ pension benefits. (See Miller v. Xerox Corp. Retirement Income
Guarantee Plan, 464 F.3d 871 (9th Cir. 2006)). The Supreme Court reasoned that
failing to defer to the plan administrator could thus subject the Xerox plan to
two conflicting instructions from two different courts regarding the same plan
In emphasizing the importance of uniformity, predictability and efficiency in
ERISA plan administration, the Conkright majority cited prior Supreme Court
ERISA preemption cases. This may foreshadow the majority’s view on whether ERISA
preempts the San Francisco healthcare plan ordinance, an issue that the Supreme
Court will address next term.
Dissent: Judges Should Be Free to Reject the Plan Administrator’s
Justice Breyer, along with Justices Stevens and Ginsburg, dissented from the
majority opinion, arguing that, although principles of trust law permit courts
to defer to the trustee’s interpretation, they do not require such deference.
The dissent criticized what it termed the majority’s “one free honest mistake”
rule as impractical and encouraging litigation over what is “honest.”
Implications for ERISA Litigation Post-Conkright
Conkright seeks to discourage litigation and requires deference to a plan
administrator’s reasonable interpretations of a plan as a means of promoting
uniformity and efficiency in plan administration, with the goal of encouraging
employers to adopt and maintain ERISA benefit plans. Although the facts in
Conkright may be unique, the ERISA principles stressed by Chief Justice Roberts
have important implications for other current issues in ERISA litigation,
including not only ERISA preemption but also fiduciary litigation over plan fees
and “stock drop” claims.
For More Information
To learn more about this case, please contact the authors or any member of
Benefits or Labor and
This legal update was included in the Profit Sharing/401k Council of America Executive Report on May 10, 2010.