Day v. AT & T Disability Income Plan

When an ERISA plan beneficiary and long-term disability recipient elects to roll over his pension benefits into an IRA, that action is considered under Blankenship as the beneficiary having "received" his benefits. Thus, the employer can reduce the beneficiary's long-term disability payments by the amount of the rollover, provided that the employer does not violate the notice requirement of ERISA and the ADEA.

David Day, an ERISA plan beneficiary and participant in the AT&T Pension Benefit Plan and AT&T Disability Income Plan (the “Plan”), chose to roll over his pension benefits into his IRA account. The Plan's administrator (Sedgwick) reduced Day's long-term disability (LTD) benefits by the amount of the rollover, because Sedgwick considered Day as having "received" his pension benefits. On appeal from the district court's judgment in favor of the Plan, Day argued that the district court used the wrong standard of review, that AT&T failed to disclose to Day the ramifications of his choice to rollover his pension benefits into his IRA, and that Sedgwick's actions violated the Age Discrimination in Employment Act (ADEA). First, the Ninth Circuit found that the district court properly employed the abuse of discretion standard of review. The Plan granted Sedgwick discretion to interpret any ambiguous terms and Sedgwick reasonably interpreted the language of the Plan. Under Blankenship v. Liberty Life Assurance Co. of Boston, to "receive" means to "take control." One who rolls over a pension into an IRA has taken "control" of those assets. Therefore, Sedgwick was not unreasonable in concluding that Day "received" his pension benefits. Second, the Ninth Circuit rejected Day's argument that AT&T failed to disclose to Day the ramifications of his choice to rollover his pension benefits into his IRA. Third, the Ninth Circuit found Sedgwick's actions did not violate the ADEA or the Ninth Circuit's holding in Kalvinskas v. California Institute of Technology. In Kalvinskas, the employee's LTD benefits were reduced by the retirement benefits for which he was "eligible," not the benefits which he had "received." Additionally, the safe harbor policy for employers under the ADEA do not allow "double-dipping" into an IRA and LTD benefits, which would be the case if Day's interpretation of the plan were correct. AFFIRMED.