Opinion ID: 421887
Heading Depth: 1
Heading Rank: 5

Heading: Was Mallory's Denial of Severance Benefits to Plaintiffs Arbitrary and Capricious?

Text: 14 In a well considered opinion the district court held that the employee benefit plan was administered in a rational and reasonable manner, in good faith, within the discretion of the administrators and in accordance with the plain wording of the documents and instruments governing the plan. The court stated: 15 The denial of severance pay to employees who accepted their old positions with the purchaser of the Metallurgical Division was not arbitrary or capricious. Severance pay is generally intended to tide an employee over while seeking a new job and should be considered an unemployment benefit. Read as a whole, the SPI clearly anticipates the recipient of the severance benefits to be without employment. For example, it provides for a leave of absence during which time certain benefits remain in force as though the employee were still employed. That approval must be had in advance as well as the provision that other separation arrangements than outlined in the SPI may be made indicates that the award of separation benefits is discretionary. Finally, the SPI provides that severance pay be awarded when the employee is involuntarily terminated due to a reduction in work force or position elimination. While it is true that the work force of Mallory was reduced and positions were eliminated within Mallory due to the sale of the Metallurgical Division, in fact the work force remained intact and the positions remained available to the employees. To award severance benefits under these facts would result in a windfall to the employees who retained their positions with the purchaser of the going concern, which was clearly not the intention or goal of either the SPI or of ERISA.
16 ERISA is a broad, remedial statute, designed to protect the rights of participants in employee benefit plans and their beneficiaries. Section 404(a)(1) of the Act, 29 U.S.C. § 1104(a)(1), provides: 17 (a)(1) ... a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and(A) for the exclusive purpose of: 18 (i) providing benefits to participants and their beneficiaries; and 19 (ii) defraying reasonable expenses of administering the plan; 20 (B) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; 21