Opinion ID: 726590
Heading Depth: 3
Heading Rank: 2

Heading: Do benefits include company-paid health premiums?

Text: 36 Defendants contend that the ERISA documents cannot support a reading of the term benefits to include payment of health care premiums. We begin our inquiry with the LTD Plan's SPD itself. It is impossible solely from the language of the SPD's termination provision to determine what benefits the phrase Long Term Benefits and your claim for such benefits includes. Elsewhere the SPD uses the term Long-Term Disability benefit and Long-Term Disability Plan benefits to describe what eligible employees are entitled to. The document does not expressly define either term, or distinguish between the two. See Aplt.App. 505-06. Plaintiffs point to several parts of the SPD to suggest that Long Term Benefits includes payment of the health insurance premiums. First, they note that the termination clause refers to benefits in the plural, while the definition section of the SPD refers to the compensation replacement component of the LTD Plan in the singular. (Basic monthly compensation: If you become disabled, the benefit you receive from the plan is calculated using your basic monthly compensation ...) Aplt.App. 506 (emphasis added). In other parts of the SPD, the term benefit and benefits are both used to describe what the LTD Plan provides. Second, the SPD refers to the premium payments several times as benefits that are part of long term disability status. Page 7 of the SPD states: Status: While on Long-Term Disability Status the company will pay the premiums for all the company-sponsored benefits ... for which you and your dependents were enrolled before your disability began. Aplt.App. 510. Again on page 11: 37 Rehabilitation benefits are calculated as follows: ... 2) If you are receiving Long-Term Disability benefits when you return to work on Rehabilitation Status, your rehabilitation benefit will be equal to 60 percent of you wage loss.... This benefit is not taxed. The company will continue to pay premiums on company sponsored benefits.... 38 Aplt.App. 514. On page 14, the SPD provides a chart entitled Continuation of other Benefits and Programs During Disability. In this chart, it is clear that the company pays the health care premium for employees who are Disabled and on Short-Term or Long-Term Status. 39 Plaintiffs have made a prima facie case that a reasonable person in the position of an LTD Plan participant could find the language in the SPD to include payment of health insurance premiums as a benefit to which persons on Long-Term Disability Status are entitled. Long-Term Disability Status is achieved after an employee's fifth consecutive month of disability. Aplt.App. 509. The promise of continuing benefits in the termination clause applies to persons who are totally disabled, a term that likewise is not defined. The term Long-Term Disability benefits, as used in the termination clause, is susceptible to the reading given it by plaintiffs, that the termination clause can be read to vest health benefits. See Carland v. Metropolitan Life Ins. Co., 935 F.2d 1114, 1120 (10th Cir.), cert. denied, 502 U.S. 1020, 112 S.Ct. 670, 116 L.Ed.2d 761 (1991). 40 Defendants argue that when looking at the plan documents as a whole, the language regarding the extent of benefits at termination is unambiguous. Beginning with the SPD they note that the purpose of the LTD Plan is to protect disabled employees from loss of income and to help them return to productive work whenever possible. Aplt.App. 504. From this the defendants conclude that the LTD Plan's SPD must be read to insure only against income loss created by disability. Defendants fail to recognize that requiring disabled employees to pay their health care premiums out of the 60% salary replacement benefit exacerbates their income loss. This language does not resolve the apparent ambiguity. 41 Next, defendants explain the apparent ambiguity of using both benefit and benefits to describe the income replacement provision of the LTD Plan by suggesting that when used in the singular, the SPD is referring to a single periodic payment of the income replacement, while when used in the plural it refers to multiple payments. The language of the SPD section on payment of the salary replacement benefit could be read consistently with defendants' interpretation. Nevertheless, we cannot say that this explanation removes the ambiguity. An SPD is intended to be a document easily interpreted by a layman; an employee should not be required to adopt the skills of a lawyer and parse specific undefined words throughout the entire document to determine whether they are consistently used in the same context. See McKnight v. Southern Life & Health Ins. Co., 758 F.2d 1566, 1570 (11th Cir.1985) (the purpose of an SPD is to simplify and explain the complex document that makes up the plan). An employee reading the SPD and believing that upon the termination of the LTD Plan she would be entitled to continued company-paid premiums for health insurance, is not engaging in an unrealistically narrow interpretation of the document. Wise, 986 F.2d at 939 (quoting Sharron v. Amalgamated Ins. Agency Serv., Inc., 704 F.2d 562, 566 (11th Cir.1983)). Plaintiffs' reading of the promised benefits in the SPD's is not rebutted by defendants' reference to the SPD as a whole. 42 Defendants next shift to the LTD master plan document itself. Noting that it does not include health premium payments as benefits within the plan, they argue that only the Control Data/Ceridian Health Care Plan provides these benefits to disabled employees. Because the LTD Plan's termination clause has no vesting effect on benefits granted under the health care plan, defendants maintain the LTD Plan benefits are unambiguously limited to income replacement. Defendants submit that by reviewing the LTD Plan's language, any ambiguity in the SPD is resolved. The issue then narrows to whether the ambiguity of plan benefits in the plan SPD can be resolved against participants by looking to the plan master documents. 43 While Control Data/Ceridian may have intended to coordinate the benefits in its various plans in such a manner that LTD Plan participants were entitled only to income replacement benefits upon the termination of the plan, it was obligated by the SPD to inform its employees of such intent. 29 U.S.C. § 1022(a)(1); see also 29 C.F.R. § 2520.102-3(j)(2), (l) (a welfare benefit plan's SPD shall include a description or summary of benefits and a statement clearly identifying circumstances which may result in disqualification, ineligibility, or denial, loss, forfeiture or suspension of any benefits that a participant or beneficiary might otherwise reasonably expect the plan to provide on the basis of the description of benefits required). The LTD Plan SPD nowhere states that health care benefits provided to those on disability come from the health care plan, not from the LTD Plan. In fact, the LTD Plan SPD purports to summarize the LTD program, not the Health Care program. 44 Because the SPD is such an important vehicle in ERISA's attempt to fairly regulate employment benefits, courts have held that the terms of the master plan cannot control an SPD's provision that is ambiguous or in conflict with the master plan document. Pierce v. Security Trust Life Ins. Co., 979 F.2d 23, 27 (4th Cir.1992); Hansen, 940 F.2d at 981-82; Heidgerd v. Olin Corp., 906 F.2d 903, 907 (2d Cir.1990); Edwards v. State Farm Mut. Auto. Ins. Co., 851 F.2d 134, 136 (6th Cir.1988); McKnight, 758 F.2d at 1570-71. The duty of clarity falls upon the plan sponsor. As the Fifth Circuit cogently reasoned in Hansen: 45 Any burden of uncertainty created by careless or inaccurate drafting of the summary must be placed on those who do the drafting, and who are most able to bear that burden, and not on the individual employee, who is powerless to affect the drafting of the summary or the policy and ill equipped to bear the financial hardship that might result from a misleading or confusing document. Accuracy is not a lot to ask. And it is especially not a lot to ask in return for the protection afforded by ERISA's preemption of state law causes of action--causes of action which threaten considerably greater liability than that allowed by ERISA. 46 Hansen, 940 F.2d at 982. Allowing the plan's master documents to trump the SPD would both undermine Congress's intent for the SPD to convey accurately plan information to employees upon which they could rely, see 29 U.S.C. § 1022(a)(1), and would tempt plan sponsors to engage in drafting legerdemain in order to conceal or omit the less attractive aspects of their plan, thereby creating for ERISA a Daliesque world of legal surrealism. See James F. Stratman, Contract Disclaimers in ERISA Summary Plan Documents: A Deceptive Practice?, 10 Indus.Rel.L.J. 350 (1988) (documenting how employees reading SPDs can be misled as to their contractual rights). Based on the evidence in the record it is unclear what benefits plaintiffs were entitled upon plan termination. Whether we conclude that the ambiguous SPD renders the LTD Plan documents faulty, or that it is unclear from the plan documents what benefits the plan confers, summary judgment is inappropriate. 47 The mere demonstration that the SPD is inconsistent with the terms outlined in the LTD Plan itself does not entitle plaintiffs to the benefits they believe vested upon termination. Where the SPD incorrectly described benefits in the plan,  'to secure relief, [the claimant] must show some significant reliance upon, or possible prejudice flowing from, the faulty plan description.'  Aiken v. Policy Management Sys. Corp., 13 F.3d 138, 140 (4th Cir.1993) (quoting Govoni v. Bricklayers, Masons & Plasterers Int'l Union of America, Local No. 5 Pension Fund, 732 F.2d 250, 252 (1st Cir.1984)); accord Gable, 35 F.3d at 859; Gridley v. Cleveland Pneumatic Co., 924 F.2d 1310, 1319 n. 8 (3d Cir.) cert. denied, 501 U.S. 1232, 111 S.Ct. 2856, 115 L.Ed.2d 1023 (1991); Bachelder v. Communications Satellite Corp., 837 F.2d 519, 522-23 (1st Cir.1988). This requirement makes sense because the purpose of the SPD is to give employees an understanding of the plan upon which they are entitled to rely; the master plan document, however, is also relevant to determine what the terms of the plan actually are. Only where employees rely on an ambiguous or faulty SPD, or otherwise show prejudice from the inconsistency between the SPD and the master plan document, is relief appropriate. Any other rule would allow a windfall for some employees and unfairly increase costs for employers and their insurers, who rely on the terms of the plan in providing benefits and coverage. This in turn could jeopardize the solvency of the plan with respect to the remaining employees. Because we conclude that summary judgment is inappropriate regarding the scope of benefits vested upon plan termination, we leave it to the district court to determine the issue of reliance. 48 On remand, plaintiffs may attempt to demonstrate that the LTD Plan did in fact include health benefit premiums as part of disability benefits. 12 Alternatively, if plaintiffs' evidence only shows that the LTD Plan SPD could lead an employee to reasonably believe that the Plan intended health benefits to vest, each individual plaintiff must demonstrate some reasonable reliance on the SPD provision or prejudice flowing from the inconsistency between the SPD and the Plan master document. The issue of detrimental reliance on the plan document is not appropriate for class action determination. See Jensen, 38 F.3d at 953. 13 Of course, if plaintiffs prove that the LTD Plan in fact intended to vest a continuing health care premium waiver, no reliance need be shown.