ERISA-Second Circuit Rules That Plaintiff’s Disability Pension Was Not Calculated Correctly, And That Plaintiff Is Entitled To Prejudgment Interest

In Novella v. Westchester County, No.s 09-4061-cv(L), 09-3826-cv(XAP) (2nd Cir. 2011), the plaintiff, Carlo Novella (“Novella”), brought suit under ERISA, claiming that his disability pension had not been calculated correctly.

Novella’s work career spanned three decades. During that period, his employers were obligated, under collective bargaining agreements, to pay amounts into a pension fund (the “Fund”) on his behalf. There was one period- from 1982 to 1986 -during which Novella did not perform any work for which his employer was required to make such a contribution. In 1995, when Novella was nearing his sixty-second birthday, he became disabled as a result of injuries sustained while he was on the job. He applied for, and received, a pension (the “Disability Pension”) from the Fund. However, he was disappointed to learn that his benefits were not calculated using the pension rate in effect in 1995, but rather using two different rates for Novella’s two periods of service. The rate applicable in 1995 was applied to benefits for work performed between 1987 and 1995, and the lower rate in effect in 1981 was applied to benefits for work performed between 1962 and 1981. The use of the 1981 rate for the earlier period resulted in a lower aggregate monthly pension payment.

Novella sought administrative correction from the Fund, claiming that only the 1995 higher rate should have been used to calculate the Disability Pension. The Fund denied his claim, and Novella filed this suit. The district court agreed with Novella. It ruled that only the higher 1995 rate should have been used, and that Novella should receive prejudgment interest from the date on which the Fund denied his claim for the Disability Pension calculated using only the 1995 rate . The defendants appealed these rulings. The question for the Second Court of Appeals (the “Court”): are these rulings correct? The Court reviewed the Fund’s controlling documents–the Summary Plan Description and the Rules of the Pension Plan. The Court concluded that the use of two rates in calculating Novella’s Disability Pensions had no support in those documents. It further concluded that Novella was entitled to the prejudgment interest awarded by the district court. Thus, the Court affirmed the district court’s rulings.

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