Liu v. Kaiser Permanente Employees Pension Plan for The Permanente Medical Group

Background

Sherry Yali Liu is the surviving sister of Ya-Xia Liu, who participated in the Kaiser Permanente Employees Pension Plan, an Employee Retirement Income Security Act (ERISA) pension plan. Ya-Xia died on March 29, 2022, while employed by Kaiser and before completing the Plan’s benefit-election process. The opinion states that Ya-Xia had never married, had no domestic partner, children, or dependents.

Liu sought Plan benefits after Ya-Xia’s death. The Plan denied the claim because Liu was not shown to be a qualified dependent, Ya-Xia had not made a valid benefit election before her death, and Liu could not be treated as an eligible designated beneficiary under the cited federal tax-code provisions. The Appeals Subcommittee later denied Liu’s appeal.

Liu’s First Amended Complaint asserted three claims under ERISA. The first claim sought payment of Ya-Xia’s benefits based on an alleged rollover election and Liu’s status as beneficiary. The second asked the court to interpret the Plan consistently with 26 U.S.C. § 401(a)(9)(E) and award Liu the benefits. The third claim, against Kaiser Foundation Health Plan, Inc., sought equitable remedies for an alleged breach of fiduciary duty, including reformation and surcharge.

Analysis

The court evaluated the motion under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges a legally sufficient claim. The court accepted factual allegations as true for that purpose but did not accept unsupported legal conclusions.

First and second claims for benefits

Liu did not pursue theories that she was Ya-Xia’s surviving spouse, domestic partner, or qualified dependent. The court therefore focused on whether she was a designated beneficiary.

The Plan required a participant to complete the benefit-election process, including selecting a benefit starting date and designating a beneficiary through required written or electronic procedures. The court found that Ya-Xia had only initiated an online election and had not completed the required forms or finalized a benefit starting date or beneficiary designation. The court rejected Liu’s substantial-compliance argument, explaining that initiating an online process that was not described in the Plan document did not amount to every reasonable effort required under the circumstances.

The court also rejected Liu’s argument under 26 U.S.C. § 401(a)(9)(E). It held that the cited provision applies to defined-contribution plans, not to the Plan’s defined-benefit arrangement. The court further stated that, even if the provision applied, it could at most make Liu eligible to be designated as a beneficiary; it would not itself make her Ya-Xia’s designated beneficiary.

The court therefore dismissed the first cause of action because Liu had not established that she was Ya-Xia’s designated beneficiary. It dismissed the second cause of action because § 401(a)(9)(E) did not apply to the Plan.

Third claim for breach of fiduciary duty

The court held that Liu’s claim under ERISA § 502(a)(3) failed for at least two reasons. First, Liu had not established a violation of ERISA or the Plan because the court concluded that the Plan administrator followed the Plan’s terms. Second, the requested reformation and surcharge would effectively provide the same benefits sought in the first two claims, making the requested relief duplicative rather than relief for a separate injury.

The court also separately rejected the requested remedies. Surcharge requires a fiduciary breach, harm, and causation, but the court found no fiduciary breach and no allegation that the Plan administrator was unjustly enriched. Reformation requires allegations that the Plan terms resulted from a mistake or were induced by fraud, duress, or undue influence. The court found no such allegations and noted that Liu did not address reformation in her opposition brief.

Disposition

The court GRANTS defendants’ motion to dismiss. Because Liu’s claims failed as a matter of law and she acknowledged at the hearing that she could not allege additional facts, the court found that amendment would be futile. The court DISMISSES the case WITH PREJUDICE.