Mayer v. Ringler Associates Inc. and Affiliates Long Term Disability Plan

Background

Gregory Mayer brought an action under the Employee Retirement Income Security Act of 1974 (ERISA), claiming that defendants Ringler Associates Inc. and Affiliates Long Term Disability Plan (the Plan) and Hartford Life and Accident Insurance Company (Hartford Life) wrongfully calculated his long-term disability benefits and determined that the benefits were fully taxable. He sought reassessment of the benefits, payment of allegedly unpaid benefits, and attorneys’ fees and costs.

The parties agreed to a bench trial on a stipulated record. The Plan provided a gross long-term disability benefit equal to 66⅔ percent of a claimant’s “Pre-Disability Earnings.” Those earnings were based on the claimant’s average monthly rate of pay, including specified bonuses and commissions, during the two calendar years before disability. The Plan identified Ringler Associates Incorporated (RAI) as the policyholder, employer, and plan administrator. It designated Hartford Life as the claims fiduciary and gave Hartford Life discretion to determine eligibility and interpret the Plan’s terms.

Mayer stopped working in September 2015 because of physical limitations and applied for benefits in December 2015. He argued that compensation associated with RAI-Scarsdale, Inc., which he owned and operated, should be included in the calculation. He also argued that his SEP-IRA contributions should be included and that the benefits should not be fully taxable because he or another entity had paid the premiums.

Hartford Life initially denied Mayer’s claim, later overturned that denial, and calculated his monthly Pre-Disability Earnings as $10,416.68. It calculated his gross monthly disability benefit as $6,944.45. Hartford Life ultimately upheld that calculation, determined that RAI—not RAI-Scarsdale—was the relevant employer and plan administrator, disregarded the SEP-IRA contributions, and determined that Booklet 4.5 governed Mayer’s coverage because RAI paid the premiums. Under that coverage, Hartford Life treated the benefit as fully taxable.

Standard of Review

The court first addressed whether it should review Hartford Life’s decision de novo, meaning independently and without deference, or under the more deferential arbitrary-and-capricious standard. The court rejected Mayer’s argument that a California law invalidating discretionary plan provisions applied because Mayer was a New York resident, not a California resident.

The court also rejected Mayer’s arguments that Hartford Life violated ERISA claims-procedure requirements. The administrative record showed that Hartford Life considered Mayer’s submissions. Hartford Life notified him within 45 days that it needed additional information and therefore had special circumstances for extending its review. The court also held that the version of the applicable regulation in effect when Mayer filed his claim did not require Hartford Life to provide new or additional information generated or considered during the appeal before deciding the appeal.

The court therefore reviewed Hartford Life’s decision under the arbitrary-and-capricious standard. Under that standard, a decision may be reversed only if it lacks a reasonable basis, lacks substantial evidence, or is legally erroneous. Substantial evidence is evidence that a reasonable person could accept as adequate to support the decision.

Merits

The court concluded that Hartford Life’s decision was neither arbitrary nor capricious. First, it was reasonable for Hartford Life to treat RAI as the employer, plan administrator, and policyholder and to rely on information supplied by RAI. The record showed that RAI managed enrollment, administered the Plan, paid premiums, and served as the policyholder. The court therefore upheld Hartford Life’s reliance on RAI’s wage and earnings information rather than information supplied by Mayer or RAI-Scarsdale.

Second, the court upheld Hartford Life’s decision to exclude Mayer’s SEP-IRA contributions. Hartford Life determined that the contributions were to a type of retirement plan identified as a 408(k) plan and therefore did not fall within the Plan’s definition of earnings based on salary-reduction or similar arrangements.

Third, the court upheld Hartford Life’s determination that the benefit was fully taxable. RAI confirmed that it paid Hartford Life the premiums for Mayer’s coverage. The court stated that any dispute over whether Mayer effectively paid the premiums through an arrangement with RAI would be between Mayer and RAI, not between Mayer and Hartford Life.

Fourth, the court upheld Hartford Life’s determination that Booklet 4.5 governed Mayer’s coverage. The record supported the conclusion that RAI administered the Plan and paid the premiums, making Booklet 4.5—the booklet for producers whose premiums were not paid by themselves—the applicable booklet.

The court also considered Mayer’s argument that Hartford Life had a financial conflict because it both administered claims and paid benefits. Even assuming such a conflict existed, the court found no credible evidence that it affected Hartford Life’s decision or that Hartford Life had a history of biased claim decisions. The court further found no procedural or substantive defects that made Hartford Life’s decision arbitrary or capricious.

Disposition

The court found that the benefits decision was supported by substantial evidence and was neither arbitrary nor capricious. It concluded that the defendants were entitled to judgment in their favor. The Clerk was instructed to terminate Mayer’s motion for summary judgment, enter judgment in the defendants’ favor dismissing the complaint in its entirety, and close the case. Judge Vincent L. Briccetti signed the opinion and order on March 26, 2020.