Fifth Circuit Recognizes SPD as Sufficient Plan Document

On May 30, 2017, the United States Court of Appeals for the Fifth Circuit ruled in favor of the plan administrators in Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan. In this case, a dependent on the Alan Ritchey Welfare Benefit Plan received a settlement under a medical malpractice claim. After Rhea received her settlement, the plan sought reimbursement for the claims they had paid for her injuries. Specifically, the SPD contained reimbursement and subrogation language that required reimbursement of any funds paid by the plan in the event that a third party paid a settlement for causing such injuries.

However, Rhea refused to reimburse the plan, claiming that the plan did not have an enforceable written plan document. Rhea argued that the SPD was unenforceable because it had a clause that referenced an official plan document, and the plan did not have an official plan document.

The court disagreed with Rhea’s argument and reaffirmed the fact that an SPD can serve as a written plan document. Since the SPD contained the elements necessary under ERISA and there was no conflicting plan document, the court found that the SPD was enforceable. As a result, they affirmed the lower court’s decision by ruling in favor of the plan.

Although this case doesn’t provide new guidance, it does provide a couple takeaways for employees and employers. First, the case underscores the widely held understanding that an SPD will be enforceable as a plan document in the courts. So, participants should consider the terms of the SPD as terms that the plan will be justified in following. Second, the case reminds employers of the importance of having a sufficient SPD. Employers should ensure that their SPD meets ERISA’s requirements so that they can limit their liability in the event that a participant disagrees with plan terms.

Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan