ERISA: Fiduciary Decisions in ERISA Subject to Abuse of Discretion Review-Booth V. Wal-Mart Stores, Inc

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ERISA: Fiduciary Decisions in ERISA Subject to Abuse of Discretion Review-- Booth v. Wal-Mart Stores, Inc.1-The United States Court of Appeals for the Fourth Circuit held that abuse of discretion, not arbitrary and capricious, was the appropriate standard of review for a fiduciary's discretionary decision of an employee welfare benefit plan regulated by the Employee Retirement Income Security Act of 1974 (ERISA).2 The court clarified the abuse of discretion standard by articulating relevant factors to be considered in determining whether a fiduciary had abused its discretion.3

Barbara Booth, an employee of Wal-Mart Stores, enrolled in its self-funded employee benefit plan (the Plan). Four months after subscribing to the Plan, she sought reimbursement for a coronary angioplasty and related medical treatment. Booth's claims were denied under the pre-existing condition exclusion because of evidence of coronary heart disease. Booth appealed the decision to the Plan's Administrative Committee. After a review of Booth's file, which included statements by Booth's physicians as well as medical reviews by two physicians selected by Plan administrators, the Administrative Committee denied reimbursement of the benefits at issue. Booth brought this action in Virginia state court to recover benefits under section 502(a)(1)(B) of ERISA. Wal-Mart removed the case to federal court. At a bench trial, the district court held that the Plan had abused its discretion by denying Booth's claims, and remanded to the Plan's Administrative Committee for reconsideration.4

On appeal, the Fourth Circuit noted that there was ambiguity within the circuit as to whether the appropriate standard of review for a fiduciary's discretionary decision was arbitrary and capricious or abuse of discretion.5 The court recognized that the arbitrary and capricious standard was more deferential to the fiduciary than the abuse of discretion standard. The court held that, under ERISA, abuse of discretion was the appropriate standard of review for a discretionary decision by a plan or adminstrator.6 The court stated that under the abuse of discretion standard, a court should not disturb a fiduciary's discretionary decision provided it is reasonable.7

The Fourth Circuit articulated eight factors that a court may consider, but is not limited to, in determining the reasonableness of a decision:

(1) the language of the plan; (2) the purposes and goals of the plan; (3) the adequacy of the materials considered to make the decision and the degree to which they support it; (4) whether the fiduciary's interpretation was consistent with other provisions in the plan and with earlier interpretations of the plan; (5) whether the decision-making process was reasonable and principled; (6) whether the decision was consistent with the procedural and substantive requirements of ERISA; (7) any external standard relevant to the exercise of discretion; and (8) the fiduciary's motives and any conflict of interest it may have. …