It's Nice to Be Right: WalMart Revisited
If you read the preceding entry about the WalMart case, you might recall I ended with the notation that the plan had not actually sought to enforce its judgment. Sure enough, a week later WalMart agreed to waive the enforcement of the judgment it obtained. Public outcry aside, the plan successfully affirmed, through the Supreme Court no less, that its reimbursement provision was enforceable.
According to published reports, WalMart says that in response to this case, it amended its plan to allow for more discretion by the administrator in individual cases. While I don't necessarily believe this was the case, it does bring out an interesting point about employee benefit plans. Plan administrators, or fiduciaries, should definitely be granted discretionary authority in making plan determination. Two reasons: (1) it gives the fiduciaries great latitude in making decisions regarding general and specific plan administrations and (2) it creates a higher (and more stringent) standard of review if plan decisions are challenged in Court.
In general, courts apply a de novo standard of review, meaning they look at the facts surrounding a decision and apply those facts anew, replacing the courts judgment for the administrators. However, when a plan specifically gives fiduciaries discretionary authority in making decisions under the plan, the court must apply an "abuse of discretion" standard of review. This means that the fiduciaries' decision will be presumed correct unless there is evidence of an abuse of discretion. This is a much higher burden to meet.
So, in my opinion, the lesson from this case is really to make sure your plans have a provision providing the fiduciaries with discretionary authority to review and interpret plan provisions and to make determinations under the plan. That way, fiduciaries can freely make administrative decisions.
