Pension Protection Act Blog

The 9th Circuit provides a good reminder about carefully writing plan restatements in Shane v. Albertson’s Inc, No. 05-56319 (Oct. 15, 2007).

Stacey Shane was employed by Albertson’s, and was a participant in Albertson’s Disability Plan, when she suffered a knee injury in 1999 and began receiving Long Term Disability (LTD) benefits. When Shane suffered her knee injury in 1999, Albertson’s disability plan provided that:

“[a]ny amendment to the Plan shall be effective only with respect to Total Disabilities which commence on and after the effective date of the amendment. Total Disabilities commencing prior to the effective date of a Plan amendment are provided for under the terms of the Plan in effect at the time those disabilities commenced.”

In 2002, Albertson’s amended and restated their disability plan. The 2002 plan provided that:

“Total Disabilities commencing prior to the effective date of a Plan amendment are to be provided for under the terms of the Plan in effect at the time those disabilities commenced.”

One of the provisions added in the 2002 restated plan was for a 2-year recertification by Albertson’s Medical Review Committee. In 2003, Shane’s LTD benefits were discontinued when, as part of the 2-year recertification, the Medical Review Committee decided that she no longer met the plan’s definition of Total Disability. Shane filed an administrative appeal, which was denied. Shane then filed suit in the District Court for the Central District of California. The district court reversed Albertson’s decision to terminate Shane’s benefits. Albertson’s appealed to the 9th Circuit Court of Appeals.

The 9th Circuit affirmed the district court’s decision to reverse Albertson’s decision to terminate Shane’s benefits, finding that because Shane’s Total Disability commenced before the 2002 restatement, the 2002 restatement by its own terms did not apply to deny Shane’s benefits.

The 9th Circuit distinguished the doctrine of Grosz-Salmon, which is that the controlling plan is the plan in effect at the time the final decision is made. Grosz-Salmon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1160-61 (9th Cir. 2001). Albertson’s urged the 9th Circuit to apply the doctrine of Grosz-Salmon to find that the language of the 2002 restatement applied to deny Shane’s benefits. The Court found that the doctrine of Grosz-Salmon did not apply because both the 1993 plan and the 2002 plan contained clear language establishing that Shane’s LTD claim is to be provided for under the terms of the plan in effect at the time her disability commenced, not the plan in effect at the time the benefits were denied. The Court stated:

In Grosz-Salmon, the employee’s disability coverage claim was governed by the plan in effect at the time the employee’s claim accrued because ‘nothing in the employee’s policy with the employer…assured employees that their rights were vested.

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