ERISA-Fifth Circuit Rules That The Plan Administrator Properly Denied Death Benefits To Stepchildren

August 17, 2012

In Herring v. Campbell, No. 11-40953 (5th Cir. 2012), the following transpired. John Wayne Hunter passed away in October 2005. Hunter had retired from employment with Marathon Oil Company and was a participant in the Marathon Oil Company Thrift Plan (the "Plan"). The Plan allowed Hunter to designate a primary and second beneficiary. In 1990 and again in 2001, Hunter designated as his primary beneficiary his wife, Joyce Mae Hunter, and no secondary beneficiary. After Joyce Mae's death in 2004, Hunter did not designate a new Plan beneficiary.

Under the Plan, when a Plan participant dies without designating a valid beneficiary, the Plan provides for the distribution of the Participant's benefits to one of five classes in the following order of priority: (1) the surviving spouse; (2) the surviving children; (3) the surviving parents; (4) the surviving brothers and sisters; and (5) the executor or administrator of the participant's estate. After Hunter passed away, the Plan Administrator of the Plan considered, and rejected, the possibility that Hunter's stepsons, Stephen and Michael Herring (the "Herrings"), might be entitled to Hunter's benefits, determining that they were not "children" within the Plan's meaning. Because Hunter's spouse had predeceased him and he had no surviving parents and no biological or legally adopted children, the Plan Administrator distributed the benefits, which totaled more than $300,000, to Hunter's six siblings. The Herrings then filed this suit against the Plan Administrator to challenge the distribution. The district court found for the Herrings, and the Plan Administrator appealed.

In analyzing the case, the Court ruled that the Plan Administrator's decision to deny the Herrings the benefits was legally correct. The Plan Administrator found that the Plan had not previously determined whether the term "children" as used in the Plan included stepchildren who had not been legally adopted. She concluded that the term "children" meant biological or legally adopted children based on: (1) the need for a uniform standard for determining who were "children" under the Plan; (2) the administrative need for a practical and objective mechanism to avoid potentially burdensome and expensive investigations into a claimant's status; and (3) her conclusion that the exclusion of stepchildren from the definition was most likely to align with the expectations of the majority of Plan participants. The Plan Administrator considered that including "equitably adopted" individuals under State law-as the Herrings claimed to be- under the Plan's definition of "children" would create substantial uncertainties and additional expenses for the Plan by giving rise to disputes about whether individuals had actually been "equitably adopted".

The Court said that, in view of the foregoing, the Plan Administrator properly focused on providing a uniform interpretation of the Plan, gave the Plan a fair reading and considered that the definition urged by the Herrings would result in unanticipated costs. As such, the Court concluded that the Plan Administrator's decision to deny the Herrings the benefits was legally correct. Therefore, the Court reversed the district court's finding for the Herrings.