In Tompkins v. Central Laborer's Pension Fund, No. 12-1995 (7th Cir. 2013), the Central Laborers' Pension Fund (the "Fund") had terminated Donald J. Tompkins's disability benefits because he became employed full-time and, therefore, no longer had a "total and permanent disability." Tompkins had brought this suit under ERISA, challenging the Fund's interpretation of its definition of "total and permanent disability." The question for the Seventh Circuit Court of Appeals (the "Court"): Should the Fund's interpretation be upheld?
In this case, Tompkins had filed an application for a disability pension from the Fund based on chronic asthmatic bronchitis, which he attributed to working with cement dust for twenty-two years. His application was approved by the Fund. The plan document for the Fund defined "total and permanent disability" as follows:
A Total and Permanent Disability shall mean that the Employee is totally and permanently. . . unable to engage in further employment or gainful pursuit of non-Laborer . . . employment for which the employment is considered full-time and a primary source of income. For such non-Laborer . . . employment, . . . the Participant may earn up to $14,000 per calendar year in non-Laborer . . . employment and be considered totally and permanently disabled . . . .
Tompkins received monthly disability benefits from the Fund through May 2007. In June, the Fund sent him a letter suspending his disability pension. The letter stated that Tompkins's full-time employment at a company named Wilman Construction in 2005 and 2006 led the Fund to believe that he no longer met the Fund's definition of "total and permanent disability". According to the letter, the Fund found that Tompkins began working forty hours per week beginning in July 2005 and earned $10,550 that year and $22,100 in 2006. The letter informed Tompkins that he had been overpaid $48,654.89 in benefits from July 2005 through May 2007 and that the Fund would seek to recover that amount through its recovery process.
In analyzing the case, the Court noted that a court reviews the denial of ERISA benefits de novo, unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. The Court ruled that the plan document for the Fund gave its trustees such discretionary authority, so that the Fund's interpretation of the term "total and permanent disability" must be reviewed under the arbitrary or capricious standard.
Next, the Court said that, according to the Fund, the definition of "totally and permanently disabled" -admittedly ambiguous-should be interpreted to prohibit a totally and permanently disabled participant from engaging in full-time non-laborer employment. The $14,000 threshold applies only in the case of part-time employment. Under this interpretation, since the Fund found that Tompkins had been working in non-laborer employment full time (the employment with Wilman Construction apparently being of this nature), the $14,000 threshold does not apply to him. This employment means that he has ceased to be totally and permanently disabled, justifying the suspension of his disability pension. The Court ruled that this interpretation of the Fund's terms was not arbitrary or capricious. It rests on a reasoned understanding of "total and permanent disability", in the face of the language's ambiguity: once a participant is engaged in full-time employment, regardless of how much he makes, he is no longer totally and permanently disabled. As such, the Court upheld the Fund's interpretation and its suspension of the benefits.