Day v. AT&T Disability Income Plan: Ninth Circuit Affirms Plan Administrator's Reduction of Former Employee's Long Term Disability Benefits

In Day v. AT&T Disability Income Plan, --- F.3d --- (9th Cir. 7/3/12), the Ninth Circuit Court of Appeal held that a plan administrator did not abuse its discretion by reducing a former employee's long term disability benefits after the employee rolled his pension benefits into an individual retirement account.  

David Day, an ERISA plan beneficiary, elected to roll over his pension benefits into an individual retirement account (IRA) upon separation from his employer, AT&T. Exercising its discretion, the plan's claims administrator construed Day's lump sum rollover as the equivalent of his having "received" his pension benefits and, according to the terms of AT&T's Disability Income Benefit Plan, reduced Day's long-term disability (LTD) benefits by the amount of the rollover. Day argues that having his pension payout deposited directly into an IRA subject to tax penalties for early withdrawals meant he did not actually receive the funds, an interpretation that finds support in Blankenship v. Liberty Life Assurance Co. of Boston, 486 F.3d 620, 624-25 (9th Cir. 2007). Reviewing the claims administrator's decision for an abuse of discretion, however, we must defer to the administrator's reasonable interpretation of the plan. We also reject Day's further contentions that AT&T failed to sufficiently disclose the possibility that his LTD benefits would be reduced by his receipt of pension benefits, and that the administrator's actions violate the Age Discrimination in Employment Act (ADEA). Accordingly, we affirm the judgment of the district court.

Slip op. at 1.  The opinion is available here.