ERISA-Eighth Circuit Upholds The Plan Administrator’s Ruling That The Participant’s Benefit Was Transferred Out Of The Plan Prior To His Death, So That His Surviving Spouse Had No Claim To The Benefit

In Wengert v. Rajendran, No. 16-4571 (8th Cir. 2018), Susan Wengert sued the members of the plan-administrative committee (the “plan administrator”) of the Majors Plastics, Inc. Employee Stock Ownership Plan (the “Plan”); the personal representative of the Estate of Timothy McConnell; and the trustee of the Timothy McConnell Trust.  The district court granted summary judgment against Wengert.  Having jurisdiction under ERISA, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district court’s judgement.

In this case, Wengert’s husband was Timothy J. McConnell.  He filed for divorce. He was a participant in the Plan.  Under the Plan, the amount in a participant’s account is an “Accrued Benefit.”  McConnell’s Accrued Benefit was $2,721,739.37.  On Friday, September 12, 2014, McConnell requested a lump-sum distribution of the Accrued Benefit to his trust.  The plan administrator wired the funds that same day.  McConnell died on Sunday.  The trust did not receive the funds until Monday.

McConnell was still married to Wengert when he died.  The Plan defines a “Beneficiary” as a “Participant’s surviving spouse.” The Plan says: “A pay-out of the vested Accrued Benefit . . . shall satisfy all obligations of the Plan . . . to [the] Participant or his Beneficiary.” Wengert submitted a claim for benefits.  The plan administrator denied it, saying that McConnell had no Accrued Benefit under the Plan, since the funds were transferred out before McConnell died; there is no benefit for Wengert to claim so she cannot be a Beneficiary.  Wengert, on the other hand, disagreed with the plan administrator, believing she should receive the $2,721,739.37 as McConnell’s Beneficiary.  She suggests that the Friday wire transfer is irrelevant because the trust did not receive the funds until after McConnell’s death.  Wengert brought suit, claiming the foregoing amount as a benefit under Section 502(a)(1)(B) of ERISA.

Upon reviewing the case, the Court found that the district court properly granted summary judgment to the plan administrator.  It said that the plan administrator’s decision to deny Wengert’s claim was entitled to a deferential review.  It further found that the plan administrator’s interpretation of the Plan, that it had satisfied its obligation when it transferred the Accrued Benefit out of the Plan at the husband’s request, was reasonable and not an abuse of discretion.  The plan administrator reasonably explained its interpretation of the Plan and relied on substantial evidence to deny Wengert’s claim.  When a plan administrator offers a reasonable explanation for its decision, supported by substantial evidence, it should not be disturbed.  Also, the plan administrator was not bound by state law regarding the effective date of a transfer (which would have postponed the effective date until the funds were received) because claims arising under ERISA section 502(a) implicate complete preemption.

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