In Khoury v.Group Health Plan, Inc., No. 09-3276 (8th Circuit 2010), the plaintiff, Dr. Antoine Khoury, had obtained a residual disability benefit from ReliaStar Life Insurance Company (“ReliaStar”), his employer’s long-term disability insurer and plan administrator. However, he questioned the amount of the benefit and filed this suit under ERISA.
Under the disability plan, the amount of a participant’s benefit was determined under a formula which used “Basic Monthly Earnings”. However, the plan defined Basic Monthly Earnings to exclude overtime pay. Under the terms of his employment contract, the plaintiff received “Base Department Compensation” of $500,000 per year. In order to receive this pay, the plaintiff was required to participate in a program under which he was expected to be on call one weekend every six weeks, and two weekdays per month. He received $2,500 for any additional day he was on call. The plaintiff’s pay for these additional on call days amounted to about $80,000 per year. The issue was whether the $80,000 amount was overtime pay and thus not taken into account as Basic Monthly Earnings when computing the amount of the plaintiff’s disability benefit.
ReliaStar had concluded that the $80,000 amount was overtime pay and thus excluded from Basic Monthly Earnings. ReliaStar had found that, although the plaintiff may have been required to perform additional call shifts due to staffing issues, he received extra pay for the additional on call days over and above his $500,000 base pay. ReliaStar noted that extra pay received for extra time worked is generally considered “overtime”, and is certainly considered “overtime” by the insurance industry.
The Court analyzed the case by reviewing ReliaStar’s conclusion that the $80,000 pay was overtime. In reviewing this conclusion, the Court applied a deferential standard, giving only some weight to ReliaStar’s conflict of interest (as both plan administrator and benefit payor) since the plaintiff was unable to say how the conflict adversely affected ReliaStar’s conclusion. The Court held that ReliaStar’s conclusion was reasonable, so that the $80,000 amount was overtime and excluded from Basic Monthly Earnings. Therefore this amount should not be taken into account when determining the amount of the plaintiff’s residual disability benefit.