ERISA-First Circuit Rules That A Pension Benefit Is Not Payable When The Participant Dies Before His Annuity Starting Date.

In O’Shea v. UPS Retirement Plan, No. 15-1923 (1st Cir. 2016), plaintiff Brian O’Shea (“O’Shea”) worked for defendant United Parcel Service of America, Inc. (“UPS”) for 37 years. As an employee of UPS, he participated in the UPS Retirement Plan (the “Plan”). Unfortunately, in 2008, O’Shea was diagnosed with cancer. He became eligible for retirement in 2009, and decided to retire at the end of that year. Upon the advice of UPS human resources, who was not aware of his condition, O’Shea decided to maximize his time on payroll by taking his seven weeks of accrued vacation and personal time and, thus, delay his official retirement date.

As such, he submitted his retirement application on January 7, 2010, his last day of work, and indicated that his annuity starting date for his benefit under the Plan would be March 1, 2010, the day after his official retirement date of February 28, 2010. He chose the “Single Life Annuity with 120-Month Guarantee” as the payment form, and named his four children as the beneficiaries. Nowhere in the retirement benefits application, and at no point during his consultation with UPS human resources, was it made explicit that surviving to the annuity starting date (i.e., March 1, 2010, the day after his official retirement date) was a prerequisite to the ten-year payment guarantee.

O’Shea passed away on February 21, 2010, one week before his official retirement date, and eight days before his annuity starting date. The Plan refused to pay the pension benefit, i.e., the 120 month of payments, since O’Shea failed to survive to the annuity starting date, offering only a qualified pre-retirement survivor annuity to O’Shea’s spouse, if he had one. The four O’Shea children, the named beneficiaries of the 120 months of payment, brought this suit against the Plan claiming that the pension benefit should be paid to them. The district court decided in favor of the Plan, concluding that denial of the pension benefit was a construction of the Plan terms which was plausible and correct in light of the plain language of the Plan’s terms. The First Circuit Court of Appeals (the “Court”) agreed with the district court and confirmed its decision.

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