AFFIRM; and Opinion Filed May 10, 2013.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-11-00678-CV
JOANN PHILLIPS, Appellant
V.
METROPOLITAN LIFE INSURANCE COMPANY AND THE VERIZON
EMPLOYEE BENEFITS COMMITTEE, Appellees
On Appeal from the County Court at Law No. 2
Dallas County, Texas
Trial Court Cause No. CC-10-06957-B
OPINION
Before Justices Francis and Murphy1
Opinion by Justice Murphy
JoAnn Phillips appeals from a summary judgment rendered in favor of Metropolitan
Life Insurance Company and The Verizon Employee Benefits Committee (VEBC) on her claim
that MetLife, acting on behalf of VEBC, improperly withheld long-term disability benefits to
which she was entitled. We affirm.
I. BACKGROUND
During her employment as a benefit specialist with a subsidiary of Verizon
Communications, Inc., Phillips participated in an employee welfare benefit plan (the Plan)
1
The Honorable Joseph Morris was on the panel and participated at the submission of this case. Due to his retirement from this Court on
December 31, 2012, he did not participate in the issuance of this Opinion. See TEX. R. APP. P. 41.1(a), (b).
governed by the Employee Retirement Income Security Act of 1974 (ERISA). 29 U.S.C.A. §§
1001–1461. VEBC is the Plan administrator; MetLife is the Plan’s claims administrator.
Phillips suffered from various health conditions. In April 2002, Verizon approved her
request for an accommodation under the Americans with Disabilities Act to transition to a
twenty-hour work week. Phillips ultimately stopped working in 2007 and became eligible for
disability benefits under the Plan. Her date of disability is February 16, 2007. After receiving
fifty-two weeks of short-term disability benefits, Phillips applied for and began receiving LTD
benefits in 2008. Although the parties agree that Phillips is disabled and thus entitled to benefits,
they disagree about the amount of monthly benefits due.
A. The Plan
LTD claims under the Plan are paid from the Verizon Long Term Disability Trust for
Active Employees, which is funded with employee contributions. MetLife, as the claims
administrator, received a fee to process disability claims and had the authority to make final
determinations regarding eligibility and benefit claims. The Verizon summary plan description
(SPD)2 provided to Phillips specifically identifies MetLife’s authority as including discretion to
(1) interpret the disability income program based on “provisions and applicable law and make
factual determinations about claims,” (2) determine eligibility for benefits, (3) decide “the
amount, form and timing of benefits,” and (4) resolve “any other matter” under the program
raised by a participant or beneficiary or identified by the claims administrator. The SPD also
provides that “[i]n case of an appeal, the claims administrators’ decisions are final and binding
2
The parties disagree about which SPD is applicable to Phillips’s LTD claim. Appellees assert the SPD in effect for the 2007 Plan Year
governs because Phillips first became disabled in 2007. Phillips, on the other hand, asserts the SPD in effect for the 2008 Plan Year, which she
claims amended the 2007 SPD, governs because her eligibility for LTD benefits began in 2008. Both SPDs are in the record before us, and based
on our review of the documents, there is no material difference in the provisions relevant to the issues presented in this appeal. Therefore, we
need not determine which SPD governs Phillips’s claim. Any language quoted in this opinion appears in both SPDs.
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on all parties to the full extent permitted under applicable law,” unless the participant or
beneficiary later proves the “decision was an abuse of administrator discretion.”
The SPD describes the details related to a participant’s disability coverage, but it advises
that the person’s health and well-being benefits, such as disability coverage, are governed by the
official plan document, labeled “The Plan for Group Insurance.” Both the SPD and the Plan
expressly incorporate the SPD by reference into the Plan as “the source of specific information
relating to [a participant’s] disability benefits.”3
B. LTD Benefit Calculation
According to the SPD, Phillips’s LTD benefit calculation is based on her “annual benefits
compensation” and the LTD coverage option she was enrolled in at that time. The figure used
for Phillips’s “annual benefits compensation” is determined “at the time [she] first became
totally disabled” under the short-term disability plan and is made up of the following amounts as
of July 1 of the previous calendar year:
• Base pay, including any temporary increases.
• Short-term incentives, such as Verizon Incentive Plan awards.
• Commissions (based on a rolling 12-month period, beginning July 1).
• Foreign service premiums.
Overtime pay, discretionary awards, sales draws, and bonuses are excluded from annual benefits
compensation. The SPD defines “pay” as a participant’s “annual base salary,” which does not
include overtime pay, incentives, or “[a]ny other element of compensation other than base
recurring salary.”
3
The Plan does not appear to be part of the administrative record. Appellees submitted the Plan as part of the proceedings in the trial court.
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Phillips’s “monthly unreduced LTD benefit” is calculated by dividing her “annual
benefits compensation by 12 to arrive at [her] monthly benefits compensation amount.” That
amount is then multiplied by Phillips’s benefit level, which was 50%. The monthly LTD benefit
amount also is reduced by benefits provided from “[o]ther sources of disability income,” such as
social security disability income and “[p]ension benefits from a Verizon pension plan, if
[Phillips] elect[s] to receive them.” If the monthly LTD benefit is reduced by other sources of
disability income, the monthly benefit “will not be reduced below whichever of these is greater”:
10% of her unreduced monthly LTD benefit or $100. But this minimum monthly benefit amount
does not apply if the participant receives an overpayment of benefits.
C. Phillips’s Claim for LTD Benefits
MetLife approved Phillips’s claim for LTD benefits by letter dated September 30, 2008.
For the period beginning February 15, 2008 (the date she became eligible for LTD benefits)
through December 31, 2009, Phillips was paid LTD benefits based on an annual benefits
compensation figure of $47,400, for an unreduced LTD benefit of $1,975.00 per month.4 That
monthly benefit also was reduced by Phillips’s social security disability income. On December
2, 2008, MetLife wrote to Phillips that it had reduced her monthly benefit by an additional
amount of $760.25 per month based on her receipt of pension benefits effective November 2008.
After the second reduction, her LTD benefit was $197.50 per month, which was the minimum
monthly benefit amount under the Plan (10% of her unreduced monthly LTD benefit).
The reduction in Phillips’s monthly LTD benefit based on pension benefits followed her
certification, signed November 17, 2008, that she had “elected the Lump Sum option from the
Verizon Management Pension Plan to commence on November 1, 2008.” This “payment
4
$47,400 (annual benefits compensation) ÷ 12 (months) × 50% (Phillips’s coverage level) = $1,975.00 (unreduced monthly LTD benefit).
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option” paid $160,963.40. That same day, her spouse also signed a consent form in which he
certified his consent “to [his] spouse’s election to begin benefits now.”
When she elected the lump sum option, Phillips chose to roll over her pension benefits
into a traditional IRA. And in accordance with her election, the Verizon benefits center sent
Phillips a check payable to ING Bank for deposit into the “IRA OF JOANN H PHILLIPS.” The
check stub described the payment amount as a “CASH DISTRIBUTION.” Phillips signed an
IRA deposit form, indicating she was enclosing a check for deposit; the “deposit type” was for
“Employer Plan to IRA Rollover.”
On January 8, 2010, MetLife informed Phillips by letter that her salary from which the
annual benefits compensation was derived was “incorrectly reported” and the correct unreduced
benefit payable was $1,402.08 per month, not $1,975.00 per month. This corrected amount was
based on an annual benefits compensation figure of $33,650. MetLife adjusted Phillips’s LTD
claim to reflect the correct benefit amount, which included reductions for her social security
disability income and pension benefits, and informed Phillips the correction resulted in an
overpayment of her claim. Responding to Phillips’s request for more information, MetLife sent
Phillips another letter dated April 2, 2010, in which it explained that Phillips’s “correct yearly
pre-disability earnings were $33,650” and that her LTD benefit paid from February 2008 through
December 31, 2009 on an annual benefits compensation figure of $47,400 resulted in an
overpayment. MetLife further informed Phillips by a May 14, 2010 letter that the pre-disability
earnings “used to calculate her monthly benefit amount” were provided by Verizon.
In the April 2010 letter, MetLife also addressed the additional offset to Phillips’s LTD
benefit based on her pension benefits. MetLife stated that in November 2008, it had received
information from Phillips’s employer indicating that she “had commenced her pension benefits
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and elected to take the payment in a lump sum amount of $160,963.40 with a monthly equivalent
amount of $760.25.” It explained that although the lump sum amount was rolled over into an
IRA, her employer confirmed that the rollover was “considered an offset to her monthly LTD
benefit” amount as indicated in the Plan.
Phillips appealed MetLife’s determination of her benefits in July 2010, contending
MetLife made egregious errors in reducing her monthly LTD benefit based on a “miscalculation
of her annual benefits compensation” and “an improper offset for pension benefits she ha[d] not
received.” She sought $4,390.15 in underpaid LTD benefits through June 2010 because of
“various miscalculations by MetLife.”
Regarding her contention MetLife miscalculated her annual benefits compensation,
Phillips attached check stubs for the relevant period for determining her annual benefits
compensation, which the parties agree is July 1, 2005 through June 30, 2006 based on her
disability date of February 16, 2007. The check stubs reflected a consistent amount for the
“cycle rate” and differing amounts as “basic wages.” Phillips explained that during the relevant
period, she did not work a straight twenty-hour week or receive the same pay for each week. She
asserted she was entitled to a monthly LTD benefit based on her “basic wages” plus incentive
awards, for an annual benefits compensation amount of $46,037.75. Phillips claimed MetLife
“utterly failed to explain the basis for its statement that Ms. Phillips’[s] ‘correct yearly pre-
disability earnings were $33,650.00’” and failed to connect the figure with the language of the
SPD.
Regarding her contention MetLife improperly offset pension benefits from her LTD
benefit, Phillips attached excerpts from the SPD related to pension benefits, her Verizon pension
election form, a copy of the lump sum check Verizon issued to Phillips’s bank for deposit into
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her IRA, an IRA deposit form, and other documents showing she rolled over her pension lump
sum from her employer’s plan to a traditional IRA. Phillips asserted this reduction was improper
because she had not “received” any pension benefits from the pension plan as required before the
benefits may be offset. Rather, the bank (not Phillips) “received” the funds. Phillips claimed
MetLife did not apply the terms of the SPD and “instead expressly relied on what ‘is considered’
by ‘her employer’ to constitute an offset.”
MetLife communicated its denial of Phillips’s administrative appeal by letter dated
August 26, 2010. In upholding its original determination of her monthly benefit amount,
MetLife first explained that Phillips’s employer is the entity “responsible for calculating” her
salary for purposes of determining her annual benefits compensation figure and for “supplying
this information to MetLife so that monthly disability benefit amounts can be determined.”
MetLife stated her employer confirmed that her salary on her last day worked was $33,650 and
that this amount included “any commissions and VIP awards” she received “based on the rolling
twelve month period beginning July 1, 2005.” MetLife advised Phillips that she should contact
her department supervisor if she did not agree with the salary information provided by her
employer.
MetLife then addressed the offset to her monthly LTD benefit based on her pension
benefits. MetLife stated Phillips “elected to receive her pension from her employer” and that the
Plan “does not stipulate that pensions rolled over into a traditional IRA would be exempt from
being considered as other sources of disability income as defined by the Plan.” MetLife
concluded the original determination for her monthly benefit amount using an annual benefits
compensation of $33,650 and including an offset for pension benefits was appropriate.
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D. This Lawsuit
Phillips appealed that determination by filing her trial court petition to recover benefits
due under the Plan. See 29 U.S.C.A. § 1132(a)(1)(B) (permitting plan participant to bring civil
action to recover benefits, enforce rights under plan terms, or clarify future benefits rights). She
specifically sought payment of $5,599.87 in unpaid LTD benefits through September 2010. She
also claimed her LTD benefits continue to accrue at a rate of $403.24 per month, which she
alleged was the proper monthly benefit amount based on her annual benefits compensation
amount of $46,037.75 and including a reduction for social security disability income (but no
reduction for pension benefits because she did not receive them).
Based on the administrative claim record before the trial court, Phillips filed a motion for
summary judgment. She supported her motion with excerpts from the administrative record,
which included portions of the 2008 SPD and her check stubs for the relevant period; she also
attached a service agreement between MetLife and Verizon that she obtained in discovery.
Appellees responded and included a joint cross-motion for summary judgment. The cross-
motion was supported by the 2007 SPD and excerpts from the administrative record, which
included a “Print Claim Activity” log and screen shots of Phillips’s pay history from Verizon.
They also supported the cross-motion with two affidavits with attachments and a print-out of the
definition of “receive” from the Webster’s Online Dictionary. Phillips filed objections to
appellees’ summary-judgment evidence, objecting to the 2007 SPD and portions of the two
affidavits. She also objected to certain attachments to the affidavits because they were not
included in the administrative record.
The trial court granted appellees’ cross-motion for summary judgment and denied
Phillips’s motion; it signed a final judgment on May 20, 2011, dismissing Phillips’s claims with
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prejudice. Thereafter, Phillips filed a motion for new trial in which she complained of the
court’s refusal to rule on her objections to appellees’ summary-judgment evidence. She also
filed an amended motion for new trial, arguing the trial court should vacate its order and final
judgment because of a recently-issued United States Supreme Court decision, which she claimed
rejected two of the central arguments raised by appellees in their cross-motion. On July 8, 2011,
the trial court signed one order overruling each objection Phillips raised as to appellees’
summary-judgment evidence and another order denying Phillips’s amended motion for new trial.
II. DISCUSSION
Phillips presents three issues on appeal. In her first two issues, she contends the trial
court erred in granting summary judgment, upholding the determination of her monthly LTD
benefit amount, because (1) the figure used for her annual benefits compensation had no rational
connection to the evidence in the record and (2) the offset to her monthly LTD amount based on
pension benefits she did not receive was improper. Phillips argues in her third issue that the trial
court erred by overruling her objections to appellees’ summary-judgment evidence.
A. Summary-Judgment Standard of Review
The parties filed traditional motions for summary judgment, and we apply standard
summary-judgment rules in ERISA cases. See Atkins v. Bert Bell/Pete Rozelle NFL Player Ret.
Plan, 694 F.3d 557, 566 (5th Cir. 2012); Cooper v. Hewlett-Packard Co., 592 F.3d 645, 651 (5th
Cir. 2009); see also Barhan v. Ry-Ron Inc., 121 F.3d 198, 201–02 (5th Cir. 1997) (noting that
“summary judgment is an appropriate procedural vehicle for the administrator to use in obtaining
a resolution of the plan beneficiary’s suit; [o]nce the motion for summary judgment is filed, the
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usual summary judgment rules control.”).5 Under those rules, we review de novo the trial court’s
summary judgment. Mid-Century Ins. Co. of Tex. v. Ademaj, 243 S.W.3d 618, 621 (Tex. 2007);
Beesley v. Hydrocarbon Separation, Inc., 358 S.W.3d 415, 418 (Tex. App.—Dallas 2012, no
pet.). The movant has the burden of showing that no genuine issue of material fact exists and
that it is entitled to judgment as a matter of law. Beesley, 358 S.W.3d at 418.
B. Legal Standards for Reviewing ERISA Benefit Determinations
We also review de novo the trial court’s application of the appropriate standards of
review to be applied to an ERISA administrator’s benefits determinations. Atkins, 694 F.3d at
566 (citing Meditrust Fin. Servs. Corp. v. Sterling Chems., Inc., 168 F.3d 211, 213 (5th Cir.
1999)); Lynd v. Reliance Standard Life Ins. Co., 94 F.3d 979, 980–81 (5th Cir. 1996) (question
of whether trial court employed appropriate standard in reviewing ERISA plan administrator’s
eligibility determination is one of law reviewed de novo). The standard of review for an ERISA
benefits determination is dependent upon the language of the controlling plan. In ERISA cases,
an administrator’s interpretation or application of the plan is reviewed using a de novo standard
of review unless the benefit plan expressly gives the administrator or fiduciary discretionary
authority to determine eligibility for benefits or to construe the plan’s terms. Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If the plan language grants an administrator
such discretionary authority, we review the administrator’s determinations for an abuse of
discretion. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111 (2008); Firestone, 489 U.S. at 115;
5
Cf. LaAsmar v. Phelps Dodge Corp. Life, Accidental Death & Dismemberment & Dependent Life Ins. Plan, 605 F.3d 789, 796 (10th Cir.
2010) (describing summary judgment as mere “vehicle for deciding the case” and “non-moving party is not entitled to the usual inferences in its
favor”) (quoting Bard v. Boston Shipping Ass’n, 471 F.3d 229, 235 (1st Cir. 2006)); Day v. AT&T Disability Income Plan, 733 F. Supp. 2d 1109,
1112 (N.D. Cal. 2010) (summary-judgment motion is “‘merely the conduit to bring the legal question before the district court’” where ERISA
abuse of discretion standard applies and “‘the usual tests of summary judgment, such as whether a genuine dispute of material facts exists, do not
apply’”) (quoting Nolan v. Heald Coll., 551 F.3d 1148, 1154 (9th Cir. 2009)). The parties here do not suggest a fact dispute exists precluding
summary judgment or that a different summary-judgment standard of review exists.
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Gorman v. Life Ins. Co. of N. Am., 811 S.W.2d 542, 548 (Tex. 1991) (op. on reh’g) (observing
Firestone resolved review standards where administrator maintains discretion).
The abuse of discretion standard in the ERISA context “is synonymous with arbitrary and
capricious review.” Cooper, 592 F.3d at 652. Under this standard, the plan administrator’s
decision must be supported by “substantial evidence.” Atkins, 694 F.3d at 566 (citing Ellis v.
Liberty Life Assurance Co. of Boston, 394 F.3d 262, 273 (5th Cir. 2004)). Substantial evidence
is “‘more than a scintilla, less than a preponderance, and is such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.’” Id. (quoting Deters v. Sec’y
of Health, Educ. & Welfare, 789 F.2d 1181, 1185 (5th Cir. 1986)). A decision is arbitrary if it is
made “without a rational connection between the known facts and the decision or between the
found facts and the evidence.” Meditrust Fin. Servs., 168 F.3d at 215. Our review of the
administrator’s decision is not complex or technical; we must assure the decision “fall[s]
somewhere on a continuum of reasonableness—even if on the low end.” Corry v. Liberty Life
Assurance Co. of Boston, 499 F.3d 389, 398 (5th Cir, 2007) (quoting Vega v. Nat’l Life Ins.
Servs., Inc., 188 F.3d 287, 297 (5th Cir. 1999) (en banc), overruled on other grounds by Glenn,
554 U.S. at 105).
Under an abuse of discretion standard, our review of the plan administrator’s
determinations is limited to the administrative record. See LifeCare Mgmt. Servs. LLC v. Ins.
Mgmt. Adm’rs Inc., 703 F.3d 835, 841 (5th Cir. 2013); see also Estate of Bratton v. Nat’l Union
Fire Ins. Co. of Pittsburg, Pa., 215 F.3d 516, 521 (5th Cir. 2000) (noting certain limited
exceptions exist for trial court to stray from administrative record, such as “admission of
evidence related to how an administrator has interpreted terms of the plan on other instances”);
Meditrust Fin. Servs., 168 F.3d at 215 (review confined to record available to administrator).
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We may “consider only the actual basis on which the administrator denied the claim”; we may
not consider “‘post-hoc rationalization[s].’” Koehler v. Aetna Health Inc., 683 F.3d 182, 190
n.18 (5th Cir. 2012) (quoting Robinson v. Aetna Life Ins. Co., 443 F.3d 389, 395–96 n.4 (5th Cir.
2006)). Standard evidentiary rules do not apply to the claim administrator’s benefits
determinations; in assessing the reasonableness of the administrator’s decision, we review the
entire administrative record, including hearsay evidence relied on by the administrator. See, e.g.,
Speciale v. Blue Cross & Blue Shield Ass’n, 538 F.3d 615, 622 n.4 (7th Cir. 2008) (because plan
administrator not a court of law, administrator not bound by rules of evidence); Bressmer v. Fed.
Express Corp., 213 F.3d 625, 625 (2d Cir. 2000) (same).
A two-step process applies to our review of a plan administrator’s interpretation of a
plan’s terms. See Ellis, 394 F.3d at 269–70; Wildbur v. ARCO Chem. Co., 974 F.2d 631, 637–38
(5th Cir.), modified, 979 F.2d 1013 (1992); see also Firman v. Life Ins. Co. of N. Am., 684 F.3d
533, 539 (5th Cir. 2012) (per curiam). In the first step, a court determines the legally correct
interpretation of the plan. Ellis, 394 F.3d at 269; Gosselink v. Am. Tel. & Tel., Inc., 272 F.3d
722, 726 (5th Cir. 2001). To determine if the administrator’s interpretation was legally sound,
we consider: “(1) whether the administrator has given the plan a uniform construction, (2)
whether the interpretation is consistent with a fair reading of the plan, and (3) any unanticipated
costs resulting from different interpretations of the plan.” Ellis, 394 F.3d at 270 (citing Wildbur,
974 F.2d at 637–38); see also Koehler, 683 F.3d at 187 (noting “most important factor” in the
analysis is “whether the administrator’s interpretation is consistent with a fair reading of the
plan”) (internal quotations omitted). If that analysis results in the conclusion the administrator
used a legally correct interpretation, there is no abuse of discretion and our inquiry ends. Ellis,
394 F.3d at 270. But if the administrator’s interpretation is legally incorrect, we proceed to the
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second step and determine whether the administrator’s incorrect interpretation was an abuse of
discretion. Wildbur, 974 F.2d at 638. Three factors are important to that analysis—the internal
consistency of the plan under the administrator’s interpretation, any relevant regulations, and the
factual background of the determination and any inferences of lack of good faith. Id.
Alternatively, we may also bypass the first step if we can determine the decision was not an
abuse of discretion. See High v. E-Systems Inc., 459 F.3d 573, 577 (5th Cir. 2006).
Finally, the degree of deference we afford an administrator’s decision depends on the
extent to which a claimant substantiates her claim with evidence of a conflict of interest. See
Glenn, 554 U.S. at 115. The Supreme Court instructs that where a plan administrator both
evaluates claims for benefits and pays benefit claims, the administrator is operating under a
conflict of interest. See id. at 112. We must take that conflict into consideration and weigh it as
a factor in determining whether the administrator abused its discretion. See id. at 115–17
(discussing Firestone, 489 U.S. at 115); Anderson v. Cytec Indus., Inc., 619 F.3d 505, 512 (5th
Cir. 2010) (per curiam).
C. Analysis
The parties do not dispute that MetLife had discretionary authority to review and decide
Phillips’s benefits claims, including the discretion to make factual determinations about claims
and interpret the Plan. Therefore, the trial court and this Court on de novo review consider
MetLife’s determinations regarding Phillips’s claims for an abuse of discretion. See Atkins, 694
F.3d at 566. Stated another way, we consider whether MetLife’s decisions were reasonable in
light of the record compiled during the administrative proceedings. A trial court properly grants
summary judgment in favor of an administrator if there is no triable issue of fact as to whether
the administrator abused its discretion.
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1. MetLife’s Determination of Phillips’s Annual Benefits Compensation
Phillips’s first issue relates to a dispute over the amount of her annual benefits
compensation. She argues MetLife abused its discretion in determining her annual benefits
compensation was $33,650 because this figure has no rational connection to the evidence in the
administrative record.
The figure used for a participant’s annual benefits compensation is the first part of the
calculation for determining the person’s monthly unreduced LTD benefit. The SPD instructs
MetLife to determine Phillips’s annual benefits compensation at the time she first became totally
disabled; the figure is made up of her “base pay” plus any short-term incentive awards,
commissions, or foreign service premiums paid to her during the calendar year beginning July 1
preceding her total disability (in this case, the period beginning July 1, 2005 and ending June 30,
2006). The SPD also lists certain paid elements that are not included in “annual benefits
compensation,” such as overtime pay, discretionary awards, sales draws, and bonuses. A
participant’s “pay” is her “annual base salary.”6 It does not include overtime pay, incentives, or
“[a]ny other element of compensation other than base recurring salary.”
Appellees assert the figure used for Phillips’s annual benefits compensation was based on
information electronically accessed from Phillips’s file on the Verizon computer system as
evidenced by printouts of computer screen shots contained in the administrative record. The
screen shots show the contents of inquiries related to Phillips’s pay rate history and LTD
coverage from her electronic records. The first screen shot provides multiple line items related
to Phillips’s pay rate history as of February 16, 2007, Phillips’s disability date. One line item,
6
We reject Phillips’s contentions that the definition of “pay” relates only to the calculation of short-term disability benefits and that applying
the definition of “pay” to the LTD calculation would violate ERISA regulations. The term “pay” is specifically listed in the “Disability terms to
know” section of the SPD. There is nothing in the definition to suggest the term applies to STD benefits only.
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labeled “ABC Frozen Pay,” indicates Phillips’s annual rate for the year 2007 was $33,650.7
Other line items show an annual figure of $47,400 for purposes of Phillips’s “Life Frozen Pay”
and supplemental life and AD&D; the line item for “Life Frozen Pay” appears directly below the
figure for “ABC Frozen Pay.” Another screen shot shows her LTD coverage detail as “-50% of
Pay.” An additional screen shot shows a list of Phillips’s ABC Frozen Pay rates for each year
starting in 2001 and continuing through 2008.8 Again, the rate for her 2007 ABC Frozen Pay
was listed as $33,650.
MetLife also verified this figure with an employee in Verizon’s benefits center during
Phillips’s administrative appeal. The employee confirmed by e-mail that Phillips’s “annual
benefits compensation as of 2/15/07 [was] $33,650.00.” The parties agree Phillips earned an
incentive award in the amount of $5,000 during the period, which Verizon confirmed was
included in the figure.
Phillips agrees the figure of $33,650 appears in the administrative record but complains
there is no evidence of who made the calculation or how it was calculated. She characterizes her
complaint as “a dispute over the evidence that demonstrates [her] annual benefits compensation”
and contends the figure that MetLife “read off a computer screen” and “verified” with a Verizon
employee has no rational connection to the evidence because it was not calculated from actual
data. She further contends the figure was a misstatement because it was based on what she calls
a conclusory lay opinion on “some unknown person’s calculation.”
7
The “Disability terms to know” section of the 2008 SPD provides an example of how the annual benefits compensation figure is determined.
The example specifically notes that a participant’s annual benefits compensation or “ABC” is the “[d]ollar amount frozen on 7/1 of the calendar
year preceding [the participant’s] total disability.” It also states that the “ABC date always refers to the calendar year preceding the STD date.
The ABC date and STD date are never in the same calendar year.”
8
According to the SPD, a participant’s contributions for coverage are based on the person’s annual benefits compensation as of July 1 of the
previous calendar year and the LTD coverage option chosen.
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Phillips maintains the “correct figure” for her annual benefits compensation is
$46,037.75, which she claims includes the amounts she was actually paid “down to the penny”
from July 1, 2005 through June 30, 2006 as shown on her Verizon check stubs. She argues the
check stubs she provided as proof are the “only evidence” that demonstrates the proper amount
and that MetLife “deliberately ignored” the content of her uncontroverted evidence.
It is evident by looking to the check stubs that Phillips calculated the figure of $46,037.75
by adding the “Total Pay” for each check stub she provided as part of her administrative appeal.
“Total Pay,” which is part of the “Check Summary” on each stub, is the sum of the categories
listed under the “PAYMENTS” heading. The categories of payments under that heading vary
from check to check and include such things as “Basic Wages,” holiday pay, vacation pay,
“Excused Day Off,” “Short Sickness,” “Equivalent Time Off,” and “Other Paid Absence.” The
categories show what Phillips was paid for in each pay period. For example, her “VIP Award”
of $5,000 was listed under that heading on the check stub for the pay period ending March 11,
2006. Many of the stubs also reflect that certain categories (including “Basic Wages”) were
adjusted for the prior period.
Phillips maintains the undisputed evidence of the “base pay” component of her annual
benefits compensation is reflected in her “Basic Wages” as “specifically denoted” under the
“Payments” heading on each stub. And she claims that her calculation using the actual data on
her check stubs shows what she was actually paid “in the form of base pay and VIP awards” for
the relevant period. Yet her calculation for what she maintains is the “correct figure” includes
more than just “Basic Wages” and the $5,000 incentive award. It includes her “total pay”—
everything else she was paid without reference to how these elements of compensation are part
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of her “base pay.” According to the SPD, “pay” does not include “[a]ny other element of
compensation other than base recurring salary.”
Additionally, Phillips’s calculation assumes that although her work week was a twenty-
hour work week, her base pay would also include the hours she worked over twenty hours. The
“Basic Wages” component of her check appears to be calculated by multiplying the hourly rate
listed on the check stub by the number of actual “Hours Worked.” Phillips agrees she
transitioned to a twenty-hour work week in 2002 but states her hours and pay fluctuated from
week to week during the relevant period as evidenced by her check stubs. Notably, “pay” is not
defined as what Phillips was actually paid; rather, “pay” is defined in terms of the salary Phillips
was regularly paid, that is, her “base recurring salary” minus overtime pay and any other
element of compensation. (Emphasis added). Whether the number of hours worked over twenty
hours is classified as overtime pay or as extra hours for which Phillips was paid is irrelevant.9
Likewise, “annual benefits compensation” is not defined in the SPD as the sum of everything
paid to a claimant during the relevant period. It is made up of “base pay” plus a limited number
of other elements paid to a claimant during the relevant period.
There appears to be no dispute among the parties about the validity of the check stubs in
the administrative record. Nor is there a dispute about the time period they cover. Phillips’s
assertions related to the evidence suggest that because MetLife determined her annual benefits
compensation to be a different amount (which it supported with printouts of computer-generated
pay rate information and verification from Phillips’s employer) that the content of her evidence
9
We are not persuaded by Phillips’s assertions that “Basic Wages” qualify as “recurring” because “Phillips was paid on a regular basis every
two weeks” and that there “is no evidence to demonstrate that only the first 20 hours could be considered ‘recurring.’” Although Phillips states
her “Basic Wages” reflect what she was actually paid for her hours worked, which varied from check to check, she agrees she transitioned to a
twenty-hour work week. As explained below, other components of the check stubs are consistent with being paid based on a twenty-hour work
week.
- 17 -
was ignored. Her arguments also assume that the “raw data” from the stubs could not be used to
calculate a different result. She presents no evidence, however, to suggest that either MetLife or
Verizon failed to consider the content of her check stubs during the administrative proceedings.
Consequently, Phillips’s contention that MetLife’s calculation was an abuse of its discretion
because MetLife ignored her evidence is without merit.
Contrary to Phillips’s assertions, the data from the check stubs support MetLife’s
determination for her annual benefits compensation. According to appellees, Phillips’s base rate
of pay is reflected in her “cycle rate,” a figure that appears on both the pay rate history screen
shot and on each check stub. Specifically, the screen shot reports a cycle rate of $1,101.92 as of
March 26, 2006, which was paid on a bi-weekly basis. On the check stubs, Phillips’s cycle rate
was first reported as $1,053.85 and then increased to $1,101.92, as reflected on her check stub
for the period ending April 8, 2006.10 The check stubs also reflect that Phillips was paid every
two weeks. Taking the screen shot’s stated bi-weekly cycle rate of $1,101.92 as evidence of her
base pay in the relevant period and multiplying it by twenty-six weeks, the amount is
$28,649.92. Adding in Phillips’s $5,000 incentive award, the amount is $33,649.92, or $33,650
rounded up, which is the figure MetLife used to calculate her monthly LTD benefit amount.
Phillips argues that because a “cycle rate” argument was not raised in MetLife’s original
written notice of its determination or in the letter denying her administrative appeal, appellees
cannot use the “cycle rate” as support for its decision in this Court. Alternatively, she maintains
there is “no evidence of what the ‘Cycle Rate’ represents.” In reviewing whether the
determination of Phillips’s annual benefits compensation was reasonable, however, we look to
10
Phillips’s hourly rate of pay is reported on the check stubs just below the cycle rate. In conjunction with the change in cycle rate listed on the
stubs, her hourly rate was first reported as $26.35 and increased to $27.55. Dividing the cycle rate by the hourly rate listed, it is 39.99 or 40
hours. Payment for forty hours on a bi-weekly schedule is consistent with Phillips’s scheduled twenty-hour work week.
- 18 -
all the evidence compiled during the administrative proceedings. See Corry, 499 F.3d at 401–02.
The check stubs (as well as the screen shot showing Phillips’s pay rate history) are in the
administrative record, and what the cycle rate represents can be calculated based on known facts,
specifically, facts showing that (1) Phillips was paid on a bi-weekly basis; (2) she received a set
hourly rate as shown on the check stubs; and (3) she transitioned to a twenty-hour work week.
We do not construe appellees’ explanation in its brief regarding the cycle rate as providing a new
reason to support its determination of the figure for Phillips’s annual benefits compensation.
Rather, the explanation was in response to Phillips’s contention that MetLife did not contest the
validity of her check stubs. Appellees referenced the cycle rate and argued the check stubs
“actually support MetLife’s ABC determination in that they demonstrate MetLife used the
correct ABC figure to calculate Phillips’s LTD benefit payment.”
Finally, Phillips asserts Verizon and VEBC’s conflict of interest should be weighed as a
factor against appellees. Citing the Administrative Services Agreement between MetLife and
Verizon (as contracting agent for VEBC), Phillips contends Verizon and VEBC operate under a
conflict of interest because they will be liable for the full amount of any LTD benefits awarded.
She also contends MetLife’s delegated fiduciary responsibility to make claim determinations was
“expressly subject to Verizon’s obligation in the services agreement to ‘provide MetLife with
information and documents necessary’ for MetLife to conduct the administrative appeal.” She
claims Verizon “leveraged its conflict of interest to force underpayment of [her] LTD benefits”
when it failed to provide MetLife with the necessary information and documents and instead
provided an unsubstantiated figure that underreported Phillips’s annual benefits compensation.
She further suggests MetLife’s reliance on the figure of $33,650 provided by Verizon
demonstrates procedural irregularities and states that MetLife’s disregard for her evidence is
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“incredibly sloppy claims handling,” constituting, at worst, overt bias as a result of Verizon’s
conflict.
The provision of the services agreement Phillips cites for Verizon and VEBC’s conflict
pertains to benefits awarded “as a result of Plan Benefits Litigation.” That is, as between
MetLife and Verizon, the parties agreed that Verizon would be liable for plan benefits and other
amounts recovered by a plaintiff in the event of litigation involving those benefits. And while
the services agreement states Verizon has an obligation to provide MetLife with information and
documents within its control necessary to facilitate a full and fair review of a claim on appeal,
the agreement specifically indicates MetLife assumed the responsibility and discretionary
authority for approving or denying plan benefits. The SPD also states that final authority to
determine claims was specifically delegated to a claims administrator. Despite Phillips’s
contentions, these provisions do not make it “financially advantageous” for Verizon to
underreport her salary in an effort to retain the amount she alleged was underpaid. Further,
Phillips presented no evidence showing that Verizon attempted to influence MetLife’s decision
on the amount of Phillips’s annual benefits compensation. MetLife’s request to Verizon to
verify Phillips’s annual benefits compensation also does not show Verizon had an influence over
MetLife’s determination of LTD benefits due Phillips. Her complaint is that the figure provided
by Verizon deemphasized her “uncontroverted” evidence that supported a different calculation.
For ERISA purposes, a conflict of interest exists when a plan administrator both
evaluates claims for benefits and pays benefits. See Glenn, 554 U.S. at 112. The Supreme Court
has held that this conflict should be taken into consideration in determining whether the
administrator abused its discretion. See id. at 115. A conflict that leads to the setting aside of a
discretionary decision may be evidenced by a combination of “serious concerns” arising from the
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plan administrator’s financial conflict of interest. Id. at 118. Those circumstances are absent
here. Although MetLife makes claim determinations, a claimant’s benefits are paid from a trust
that is funded by employee contributions, not by MetLife or VEBC. Thus, neither MetLife nor
VEBC was in a position to benefit financially from decisions made with respect to a person’s
LTD benefits. MetLife simply receives a fee for its services paid for with funds from the trust.
Phillips’s characterization of her issue as a dispute over the evidence that demonstrates
her annual benefits compensation, in essence, is that the balance of the evidence in the
administrative record—specifically, her Verizon check stubs—favors her calculation. Our focus
in determining whether there was an abuse of discretion, however, is whether substantial
evidence, which is more than a scintilla, supports MetLife’s decision, not that substantial
evidence supports Phillips’s calculation. See Ellis, 394 F.3d at 273 (“We are aware of no law
that requires a district court to rule in favor of an ERISA plaintiff merely because he has
supported his claim with substantial evidence, or even with a preponderance.”). MetLife’s
determination that the figure for Phillips’s annual benefits compensation is $33,650 prevails if
the decision has rational support in the record. Id. We conclude it does.
MetLife was vested with broad discretion, as described in the SPD, to decide, among
other things, the amount of benefits due a claimant. The administrative record shows MetLife
obtained the figure for Phillips’s annual benefits compensation electronically from computer-
generated records maintained for Verizon employees. The screen shots of the electronic records
reference Phillips’s correct benefit level (50%) as well as language from the SPD, specifically
the 2008 SPD, by use of the terms “ABC Frozen Pay.” MetLife confirmed the figure with
Phillips’s employer. The employer also verified the figure included an incentive award Phillips
received in the rolling twelve month period beginning July 1, 2005, as indicated in the final
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denial letter. Notably, the figure also ties to the raw data from the check stubs for the same
period based on a calculation from facts in the record related to Phillips’s employment. Printouts
from a claim activity summary related to Phillips’s LTD benefits show that MetLife
representatives repeatedly spoke with Phillips’s attorney about the annual benefits compensation
amount, including how the figure reflected Phillips’s salary and that it was adjusted after being
incorrectly reported to MetLife. The claim activity shows that when Phillips questioned the
amount of her annual benefits compensation, MetLife asked her employer to confirm the correct
amount, which it did.
This information is more than a scintilla and constitutes concrete evidence in the record
to support MetLife’s decision that the amount of Phillips’s annual benefits compensation was
$33,650. Thus, based on the terms of the SPD and the evidence in the administrative record, we
conclude MetLife’s determination that the figure of $33,650 for Phillips’s annual benefits
compensation was reasonable. See Corry, 499 F.3d at 398 (review of administrator’s decision
“need only assure that the administrator’s decision fall somewhere on the continuum of
reasonableness—even if on the low end”). Because we conclude there is a reasonable basis in
the record to support MetLife’s determination of Phillips’s annual benefits compensation, the
trial court did not err in granting summary judgment in favor of appellees on this basis. We
overrule Phillips’s first issue.
2. Interpretation of the SPD for Pension Offset
In her second issue, Phillips challenges MetLife’s interpretation of the offset provision in
the SPD, specifically, MetLife’s decision that pension benefits rolled over into an IRA constitute
benefits Phillips “received” for purposes of an offset to her monthly LTD benefit. Phillips
argues summary judgment in favor of appellees was improper because MetLife’s interpretation
- 22 -
was legally incorrect. She also characterizes her issue as a dispute over the legal standards
applied to interpret the language of the SPD.
The SPD authorized MetLife to reduce Phillips’s monthly LTD benefit by benefits
provided from other sources of disability income, including “[p]ension benefits from a Verizon
pension plan, if [Phillips] elect[s] to receive them.” Less than two months after MetLife
approved her LTD claim for benefits, Phillips elected a lump-sum distribution of her pension
benefits from her pension plan, which she then rolled over into a traditional IRA. When Verizon
informed MetLife of her election, MetLife treated the rollover as pension benefits Phillips had
elected to “receive,” resulting in the reduction of her monthly LTD benefits.
In our two-step inquiry previously described, we first consider whether MetLife’s
interpretation was legally correct, and if it is, our inquiry ends because a correct interpretation
cannot constitute an abuse of discretion. Ellis, 394 F.3d at 269–70; Wildbur, 974 F.2d at 637–38.
We look to the facts in the record and the language of the plan itself in addressing the question of
whether the interpretation was legally correct. Crowell v. Shell Oil Co., 541 F.3d 295, 312 n.72
(5th Cir. 2008). If the interpretation was legally incorrect, we proceed to the second step and
analyze whether the incorrect interpretation was an abuse of discretion. Wildbur, 974 F.2d at
638. If we reach this second step, we must also weigh as a factor whether the administrator
operated under a conflict of interest. See Crowell, 541 F.3d at 312.
Our analysis under the first step includes consideration of three factors. See Wildbur, 974
F.2d at 637–38. The second factor is said to be the “most important” because it involves the
question of whether the administrator’s interpretation is consistent with a fair reading of the plan.
Koehler, 683 F.3d at 187. In answering that question, we use basic contract interpretation
principles and interpret ERISA provisions “‘in [their] ordinary and popular sense as would a
- 23 -
person of average intelligence and experience.’” Crowell, 541 F.3d at 314 (quoting Tucker v.
Shreveport Transit Mgmt. Inc., 226 F.3d 394, 398 (5th Cir. 2000)); see also Corbello v. Sedgwick
Claims Mgmt. Servs., Inc., 856 F. Supp. 2d 868, 881–82 (N.D. Tex. 2012). That is, we interpret
the provisions as they are likely to be understood “by the average plan participant” with the
language to be given its generally accepted meaning. Crowell, 541 F.3d at 314; Chacko v.
Sabre, Inc., 473 F.3d 604, 612 (5th Cir. 2006).
Phillips argues MetLife’s interpretation of “receive” is legally incorrect because she had
not “received” any pension benefits; rather, her pension benefits were transferred from one
financial institution to another by direct rollover. She asserts that because the interpretation here
involves the SPD as opposed to the Plan, we employ “more particularized standards” in
reviewing whether MetLife’s interpretation was legally correct and that the three factors under
the first step “are not considered at all.” She relies on Rhorer v. Raytheon Eng’rs &
Constructors, Inc., 181 F.3d 634, 640 n.7 (5th Cir. 1999). The only particularized standard
Phillips cites is the rule of contra proferentem, the canon of construction requiring us to construe
any ambiguities in the language of the SPD in her favor. Although Phillips appears to assert the
rule of contra proferentem forms the basis of the entire analysis under the first step, logically,
this argument is more properly asserted with respect to the second factor; under this factor we
use basic contract principles to answer the question of whether the administrator gave the plan a
fair reading. See Horn v. Owens-Ill. Emp. Benefits Comm., 424 Fed. Appx. 312, 314–15 (5th
Cir. 2011) (per curiam) (“In addition to the [three] factors, there are some ‘particularized
standards’ that apply in evaluating whether the administrator’s interpretation of [the SPD], as
opposed to the plan itself, is legally correct.”) (internal citations omitted); see also Crowell, 541
F.3d at 314 (contract interpretation principles used under second factor). The heart of her
- 24 -
argument in fact, aligns with the second factor; she asserts MetLife did not give the SPD a fair
reading because the word “receive” is ambiguous and, therefore, the provision must be construed
in her favor. Appellees respond that the pension offset provision in the SPD is unambiguous and
MetLife gave the provision a legally correct interpretation. Appellees also respond that the rule
of contra proferentem does not apply when, as here, a plan vests the administrator with
discretionary authority to interpret the plan.
Generally, where an administrator has express authority to interpret the plan, that
discretion allows the administrator to resolve ambiguities in the plan language in its favor. See
Koehler, 683 F.3d at 188; High, 459 F.3d at 579 (plan administrator may exercise “interpretive
discretion” when construing ambiguous terms in ERISA plans). But this discretion does not
extend to SPDs. Koehler, 683 F.3d at 188. Rather, ambiguities in the SPD must be resolved in
favor of the beneficiary, even if the terms of the SPD are identical to the plan. Id. (citing Rhorer,
181 F.3d at 642). That is because SPDs must be “‘written in a manner calculated to be
understood by the average plan participant, and . . . sufficiently accurate and comprehensive to
reasonably apprise such participants and beneficiaries of their rights and obligations under the
plan.’” Id. (quoting 29 U.S.C.A. § 1022(a)). SPDs “provide communication with beneficiaries
about the plan” but “do not themselves constitute the terms of the plan.” CIGNA Corp. v.
Amara, 131 S. Ct. 1866, 1878 (2011). We only reach the rule of contra proferentem and
construe the terms of the SPD in Phillips’s favor, however, if a term remains ambiguous after
applying ordinary contract principles. See High, 459 F.3d at 578–79 (holding rule of contra
proferentem only applied when term is ambiguous); Wegner v. Standard Ins. Co., 129 F.3d 814,
818 (5th Cir. 1997).
- 25 -
The administrative record shows Phillips elected a lump-sum distribution of her pension
benefits. Her election paid over $160,000 and required her spouse to consent to her request “to
begin benefits now.” As part of her election, she certified she had not “received a previous
distribution” from the pension plan and that she understood the risk of loss associated with
“receiv[ing] a lump sum distribution.” Following her election, the Verizon benefits center sent
Phillips a check payable to her bank for deposit into an IRA in her name. The check stub
reflected the total amount for deposit was a “cash distribution” paid on January 1, 2009. Phillips,
as the “IRA Holder,” deposited the check and certified that the “funds contributed [were] eligible
to be deposited into [her] IRA Plan.”
The SPD for the Verizon pension plan and other documents associated with Phillips’s
election were presented as part of the administrative record. The other documents include a
“Special Tax Notice Regarding Plan Payments”11 that Verizon sent to Phillips in response to her
request “to start [her] Disability Pension benefit . . . .” The pension plan SPD contains a section
on “[h]ow taxes affect your pension.” It informs that special tax rules apply to lump-sum
distributions and explains that taxes will be withheld automatically from “your payment” unless
there is a request for “a direct rollover of your distribution” to among other things, a traditional
IRA. The special tax notice states that if Phillips chooses a direct rollover of her plan payment
into a traditional IRA, no income tax will be withheld until she later takes the funds out of the
IRA. The stated purpose of the tax notice to Phillips was to explain how she can “continue to
defer federal income tax on [her] retirement savings” in the pension plan; it told her there was
11
This document was among the attachments to an affidavit appellees submitted as part of the summary-judgment proceedings. Although
Phillips objected to certain attachments, which she identified by bates numbers, because they were not included in the administrative record, this
document does not appear to be included in her objections. This document was addressed to Phillips and contains the same date as the election
form she included with her administrative appeal.
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“important information” she would need before she decided “how to receive [her pension] Plan
benefits.”
Phillips contends the word “receive” is ambiguous because the tax rules applicable to
requests for a rollover indicate she will not “receive” her pension funds until she has withdrawn
them from her IRA and is taxed on the funds. She therefore maintains that under the rule of
contra proferentem, the word “receive” in the SPD means that she “must obtain actual possession
of the pension benefits by withdrawing them from her IRA without accomplishing another direct
rollover,” or stated differently, “receive” refers to “funds that actually come into the possession
of Phillips” by withdrawal from the IRA. She maintains the word must have a different meaning
than “eligible to receive.”
Phillips finds support for her interpretation in Blankenship v. Liberty Life Assurance Co.
of Boston, 486 F.3d 620 (9th Cir. 2007). Like here, the issue in Blankenship was whether a plan
participant “received” his retirement funds for purposes of a deduction from his monthly
disability payment when the funds were transferred from his employer’s plan to a Vanguard
IRA. Id. at 624. The court noted the term was not defined in the disability plan and that the
parties defined the term as “to take into possession or control.” Id. at 624–25. The court
determined that because a definition of receipt based on possession and one based on control
may lead to two separate outcomes, the term was ambiguous. Id. at 625. The court applied the
rule of contra proferentem because the plan at issue did not vest the administrator with discretion
to interpret plan provisions and construed the term as possession through actual receipt of funds.
Id. Under that interpretation, the court concluded funds rolled over into an IRA were not to be
offset against a participant’s monthly disability benefit. Id. at 626.
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Unlike the court in Blankenship, we do not consider the word “receive” to be ambiguous
in the context of the SPD for the LTD Plan. Cf. Day v. AT&T Disability Income Plan, 698 F.3d
1091, 1097 (9th Cir. 2012), cert. denied No. 12-1144, 2013 WL 1147413 (Apr. 22, 2013)
(holding pension benefits rolled into IRA were received by plan participant for purposes of LTD
benefit offset because administrator had discretionary authority to review plan). The rule of
contra proferentem therefore does not apply in this case. See Corbello, 856 F. Supp. 2d at 883.
The SPD states that to qualify for LTD benefits, Phillips must apply for all other types of
disability benefits for which she may be eligible and that benefits provided from these sources
will be subtracted from her monthly LTD benefit. The other sources of disability income include
pension benefits Phillips elected to “receive.” To “receive” means to “be given, presented with
or paid (something).” THE NEW OXFORD AMERICAN DICTIONARY 1421 (2001). Similarly, the
word means “to take possession or delivery of”; it implies that “something comes or is allowed
to come” into one’s possession. WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY OF THE
ENGLISH LANGUAGE UNABRIDGED 1894 (1981).
Phillips attempts to demonstrate an ambiguity by relying on the pension SPD and special
tax rules. She argues, in essence, that application of the tax rules renders the word “receive” in
the pension offset provision ambiguous. Under her view, she has not “received” the benefits for
purposes of calculating an offset from her LTD benefits because she will not be taxed on her
pension benefits until a withdrawal from her IRA.
Consideration of the pension SPD and special tax rules, however, does not support an
interpretation that a pension benefit was not “received” by a person because it was rolled into an
IRA. A rollover is a way to move funds from one investment vehicle to another without being
taxed on the amount; in this case, Phillips moved her pension funds from her employer’s plan
- 28 -
into a traditional IRA that she set up through a bank. Such a rollover is reported to the IRS as
evidenced by the Form 1099-R Phillips included in her administrative appeal. The decision to
roll over the pension amount into an IRA is one of “several decisions” required of Phillips when
she “requested to start” her pension benefit. As explained in the pension SPD, it is one of many
ways in which Phillips could receive her payment.
Importantly, the special tax rules related to direct rollovers do not change the fact that a
lump-sum distribution of Phillips’s pension was paid to her or that a cash distribution came into
her possession. The tax rules simply say Phillips will not be taxed on the lump-sum distribution
of her pension benefits until she withdraws them from her IRA. The focus under the tax rules is
receipt of the money from her IRA for income tax purposes. The rules tell her that if she
receives the distribution but rolls over the amount to another investment vehicle, she can defer
paying taxes on the amount. And because “pension payments are fully taxable in the tax year
you receive them,” Phillips would have paid taxes on the lump-sum distribution had she not
converted the payment into an IRA.
Tellingly, the pension SPD and special tax rules repeatedly refer to the lump-sum
distribution from the Verizon pension plan as a “payment” received by the participant. For
example, the pension SPD provides Phillips can “receive [her] benefit as a single lump sum” and
that “[w]ith a lump-sum payment, you receive payment of your entire accrued benefit in a single
payment.” The documents also refer to the distribution as an amount “received” by the
participant, containing provisions for rolling over more than the amount received and providing a
time for making a rollover: “You generally must complete the rollover of an eligible rollover
distribution paid to you by the 60th day following the day on which you receive the distribution
from your employer’s plan.”
- 29 -
The SPD at issue here and the pension plan SPD are distinct policies that apply in
different situations. See Loggins v. Nortel Networks, Inc., 206 Fed. Appx. 329, 331 (5th Cir.
2006) (noting separate employer plans should not be construed as single plan; “[a]lthough they
have the single purpose of providing employee benefits, they are clearly distinct policies and
apply in different situations.”). The pension plan SPD concerns a person’s eligibility “to receive
any pension” earned under that plan, and it provides guidance for the ways in which the person
can receive the payment. The context of the direct rollover provisions in the pension SPD and
tax notice is significant because those provisions relate to the effect the rollover has on Phillips
for income tax purposes. The pension offset provision in the SPD for the LTD Plan regards the
pension benefits given or paid to Phillips regardless of how she chooses to receive the funds or
what she does with the funds upon receipt. If, as here, she elects to receive her pension benefits,
those benefits will be deducted from her monthly LTD benefit amount.
Although Phillips argues “receive” means “funds that actually come into [her]
possession,” she does not explain how the initiation of the process to elect a lump-sum
distribution and “begin benefits now” does not show how her pension benefit did not actually
come into her possession. She simply maintains that because she is not taxed on the amount, she
did not receive it. While it is true she does not physically possess her pension distribution (the
bank does), the reality is the bank simply holds the money for her benefit and operates as a
custodian of the money to which she is entitled at any time. It was Phillips who initiated the
process of electing a lump-sum distribution and made the decision to leave the purview of her
employer’s plan and roll the distribution into an IRA. She acknowledges she maintains control
over the assets in her IRA. For example, after she deposited the “cash distribution” into her IRA,
she divided her IRA into two accounts. Cf. Day, 698 F.3d at 1097 (pension beneficiary has
- 30 -
control over IRA assets, noting he “can choose the IRA and change it; and he can withdraw
funds from it” and therefore it was “not unreasonable to say that he has received these
benefits.”).
Phillips also argues that in interpreting the SPD, MetLife applied Verizon’s “undisclosed
intent” rather than the language of the SPD. The administrative record does not support this
argument. The claim activity report indicates that before MetLife sent the December 2008 letter
regarding the pension offset to her LTD benefit, Phillips informed MetLife of her decision to
commence a pension. The activity shows a November 2008 telephone conversation in which a
MetLife representative advised Phillips that MetLife would confirm her election with her
employer and that because of the election, there was a potential overpayment. The activity
report also shows Phillips had an attorney at that time and there were repeated action items
involving correspondence or conversations with Phillips or her attorney related to her election.
When we consider MetLife’s reading of the SPD in light of the circumstances surrounding
Phillips’s election of her pension benefit, we cannot conclude the interpretation was not
disclosed.
The SPD requires that Phillips “receive” pension benefits before they can be offset from
her LTD benefits. An average plan participant, based on the popular and ordinary meaning of
the provision concerning an offset for pension benefits “received,” would understand that the
election of a lump-sum distribution from a pension plan, regardless of how the participant
chooses to receive the distribution, would be paid to the participant, taken in by the participant,
and within the participant’s control. Thus, we conclude that a fair reading of the pension offset
provision is that Phillips “received” her pension benefits when she rolled the lump-sum
- 31 -
distribution into an IRA. The second factor in our determination of whether the interpretation
was legally correct therefore weighs in MetLife’s favor.
The first factor also supports the interpretation. The first factor requires consideration of
whether MetLife consistently applied the provision to similarly situated persons covered under
the policy. We ask whether MetLife has given the SPD a uniform construction. See Crowell,
541 F.3d at 312. Phillips does not address this factor. Instead, she asserts the three factors used
to analyze whether an interpretation was legally correct “are not considered at all” because the
review involves the SPD; she argues the rule of contra proferentem applies. While we agree the
rule of contra proferentem is implicated when the interpretation involves the SPD (if there is an
ambiguity), the rule is a more “particularized standard” that is used “in addition to the [three]
factors” outlined as part of the analysis in the first step. Horn, 424 Fed. Appx. at 314.
To support their contention that MetLife gave the SPD a uniform construction, appellees
rely on the affidavits they attached as summary-judgment evidence—the affidavits of Donna
Chiffriller, a Verizon subsidiary’s corporate human resources vice president, and Matthew
Hallford, a MetLife litigation specialist. Chiffriller stated as part of her third paragraph that “any
distribution of pension benefits from the Verizon pension plan made pursuant to a participant’s
election, including but not limited to a lump sum distribution . . . rolled over into an IRA is
‘received’ by the participant” as the term “receive” is used in the SPD. Hallford testified in the
fifth paragraph of his affidavit that “pension benefits are consistently offset” from disability
benefits, “irrespective of the way the participant chooses to receive the pension benefit.” He
added there were “instances where a participant has disputed the offset provision of pension
benefits rolled over into a traditional [IRA],” MetLife’s interpretation included rollovers to IRAs,
and that the plan had been interpreted consistently to mean the participant “has received the
- 32 -
pension benefit even if he or she has rolled the benefit over into an IRA.” Phillips objected to
these statements and argues as part of her third issue that the trial court erred in overruling her
objections.12
Judicial review of ERISA benefits determinations generally is determined from the
administrative record, which “consists of relevant information made available to the
administrator prior to the complainant’s filing of a lawsuit and in a manner that gives the
administrator a fair opportunity to consider it.” Vega, 188 F.3d at 300. But there are limited
exceptions to this rule, such as “the admission of evidence related to how an administrator has
interpreted terms of the plan in other instances.” Estate of Bratton, 215 F.3d at 521; see also
Wildbur, 974 F.2d at 638 (“Determining whether the administrator has given a uniform
construction to a plan may require a court to evaluate evidence of benefit determinations other
than the one under scrutiny.”). Here, we conclude the statements made by Chiffriller, that any
distribution of pension benefits would be offset because they are “received,” and Hallford’s
statement that pension benefits are consistently offset from disability benefits regardless of how
the benefit is received, fall within the exception and may be considered as part of our analysis.
See Estate of Bratton, 215 F.3d at 521.
Phillips’s final complaint is that the trial court erred by overruling her objection to
paragraph five of Hallford’s affidavit. Specifically, she argues “[s]aid paragraph is conclusory.”
Without deciding whether the rules of evidence are applicable, we conclude the trial court did
not abuse its discretion by overruling the objection. See Holloway v. Dekkers, 380 S.W.3d 315,
320 (Tex. App.—Dallas 2012, no pet.) (reviewing trial court’s decision to admit summary-
12
Phillips specifically objected to Chiffriller’s statement because she maintains it purports to express some person’s or entity’s intent as to the
SPD and expressions of intent are irrelevant. She also objected to certain attachments to Chiffriller’s affidavit because they were outside of the
administrative record. We do not consider her statement about intent or the attachments as part of our analysis. Therefore, we need not
determine whether the trial court properly overruled her objection on that basis. See TEX. R. APP. P. 47.1.
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judgment evidence for abuse of discretion). Hallford identifies his personal knowledge of the
statements in his affidavit regarding MetLife’s procedures for processing and administering
group disability plans, including claims under Verizon’s LTD Plan. He outlines how Verizon
notifies MetLife when a plan participant elects to receive pension benefits, including the amount
of offset to the participant’s LTD benefit. He then, in paragraph five, provides the referenced
testimony regarding consistent application of the offset. Phillips does not complain Hallford did
not have personal knowledge of the information. She also fails to identify what additional
underlying facts she would require. On this record, we conclude the trial court did not err in
overruling her objection to the entire paragraph as “conclusory.” Thus, to the extent Phillips
complains about the above statements of Hallford as part of her third issue, we overrule that
issue.
Additionally, we note the affidavit statements regarding uniform application of the offset
are consistent with the record. The claim activity report shows that MetLife consulted with
Verizon about the interpretation of the pension offset provision and that Verizon informed
MetLife that the offset was correct because Phillips elected to receive her pension benefits.
Chiffriller and Hallford simply confirmed the interpretation presented in the administrative
record.
The third factor in the analysis of whether MetLife’s interpretation was legally correct is
consideration of any unanticipated costs resulting from different interpretations of the Plan.
Ellis, 394 F.3d at 270. Although appellees generally argue that Phillips’s interpretation of the
pension offset provision would result in the unanticipated costs of higher benefit payments,
appellees did not present any factual support to guide us in determining the extent to which the
interpretation would impose unanticipated costs on MetLife or VEBC. Phillips did not present
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any argument related to this factor. Consequently, we do not address this factor. See Stone v.
UNOCAL Termination Allowance Plan, 570 F.3d 252, 258 n.4 (5th Cir. 2009).
Based on our review of the relevant factors, we conclude MetLife’s interpretation of the
pension offset provision was legally correct and, therefore, the trial court properly granted
summary judgment on this basis. We overrule Phillips’s second issue.
III. CONCLUSION
We conclude the record shows a reasonable basis to support the calculation of Phillips’s
annual benefits compensation. We also conclude MetLife’s interpretation that lump sum pension
benefits elected by a participant and rolled over into an IRA constitute benefits “received” by the
participant for purposes of an offset to a monthly LTD amount. Thus, the trial court properly
granted summary judgment in favor of appellees.
We further conclude the trial court did not err in overruling Phillips’s objections to
paragraph five of the Hallford affidavit or statements outside the administrative record that fall
within the exception. We do not reach the merits of the trial court’s other evidentiary rulings
relevant to Phillips’s third issue. The evidence made the subject of these rulings would not affect
our analysis or conclusion in this appeal. See TEX. R. APP. P. 47.1.
Accordingly, we affirm the trial court’s judgment.
/Mary Murphy/
MARY MURPHY
JUSTICE
110678F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
JOANN PHILLIPS, Appellant On Appeal from the County Court at Law
No. 2, Dallas County, Texas
No. 05-11-00678-CV V. Trial Court Cause No. CC-10-06957-B.
Opinion delivered by Justice Murphy.
METROPOLITAN LIFE INSURANCE Justice Francis participating.
COMPANY AND THE VERIZON
EMPLOYEE BENEFITS COMMITTEE,
Appellees
In accordance with this Court’s opinion of this date, the trial court’s judgment is
AFFIRMED. It is ORDERED that appellees, Metropolitan Life Insurance Company and The
Verizon Employee Benefits Committee, recover their costs of this appeal from appellant Joann
Phillips.
Judgment entered this 10th day of May, 2013.
/Mary Murphy/
MARY MURPHY
JUSTICE
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Phillips, Joann v. Metropolitan Life Insurance Company & Verizon Employee Benefits
Court: Court of Appeals of Texas
Date filed: 2013-05-10
Citations: 405 S.W.3d 880, 2013 WL 1928518, 2013 Tex. App. LEXIS 5839
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