In Niebauer v. Crane & Co., Inc., No. 14-2059 (1st Cir. 2015), a case arising under ERISA, plaintiff Robert Niebauer alleges, among other things, that the administrator of his former employer’s executive severance plan denied him severance benefits, after erroneously determining that he had retired voluntarily from his position. The district court granted the defendants summary judgment on this allegation, and Niebauer appeals. In analyzing the case, the First Circuit Court of Appeals (the “Court”) found that the plan administrator’s decision to deny Niebauer’s claim for benefits was both supported by substantial evidence and procedurally proper. Accordingly, the Court affirmed the district court’s summary judgment on the benefits claim.
In this case, the executive severance plan (the “Plan”), which is a welfare benefit plan subject to ERISA, provided severance benefits to designated employees who have been involuntarily terminated. Employees who voluntarily leave the employer are entitled to benefits only if they do so for “good reason,” which the Plan defines as certain changes to an employee’s position, such as relocation, significant reduction in salary, or substantial changes to the employee’s job responsibilities. The Plan reserves to the administrator — here, the compensation committee of the employer’s board of directors — “full discretionary power and authority to construe, interpret and administer the Plan [and] to make Benefit Eligibility determinations.” As an executive, Niebauer was covered by the Plan. After leaving employment, Niebauer filed a claim for severance benefits under the Plan, on the grounds of involuntary termination. The administrator found that his leaving was voluntary, and not for good reason, and therefore denied the benefits claim. This suit followed.
In affirming the district court’s summary judgment on the benefits claim, the Court noted that where, as here, an ERISA plan-even a welfare benefit plan and specifically a “top hat” plan for executives as here – delegates to the plan administrator the discretion to construe the plan and determine eligibility for benefits under its provisions, a decision made under the plan will be upheld unless it was arbitrary, capricious, or an abuse of discretion. And here-since the administrator’s decision to deny Niebauer benefits claim was supported by substantial evidence and procedurally proper- the Court held that the decision is not arbitrary, capricious or an abuse of discretion, and therefore must be upheld.