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The standard for evaluating the consequences of a deficient benefits plan description under the Employment Retirement Income Security Act has been clarified by the 2nd U.S. Circuit Court of Appeals. Resolving a split in its district courts, the 2nd Circuit said that a person who is denied benefits must show only that he or she is “likely prejudiced” by a Summary Plan Description (SPD) that inaccurately describes requirements for receiving benefits. “The consequences of an inaccurate SPD must be placed on the employer,” Judge Joseph M. McLaughlin said in Burke v. Kodak Retirement Income Plan, 02-9051. “The individual employee is powerless to affect the drafting and less equipped to absorb the financial hardship of the employer’s errors.” The circuit’s position also set it apart from other circuits that have adopted the more stringent standard of requiring a person to show “detrimental reliance” on a deficient SPD. The decision concerned Sally J. Burke, who had lived with Kenneth Burke for eight years before their marriage in 1999. Kenneth Burke died of lung cancer less than six months after the couple married. He had participated in Kodak’s pre-retirement Survivor Income Benefits plan, which arranges payments to spouses and domestic partners upon the death of the plan participant. While Kodak’s SPD explicitly requires domestic partners to file a joint affidavit to be eligible for certain benefits, the affidavit requirement was not mentioned in the portion of the employee handbook outlining the requirements for the Survivor Income Benefits plan. Kodak denied benefits to Sally Burke under the plan because the couple had been married for less than a year. Her appeal to the plan administrators was rejected because she failed to do so within the required 90-day time period. And if she had filed within 90 days, the administrators said, she and her husband had still neglected to submit a joint affidavit of domestic partnership. She filed suit under ERISA, 29 U.S.C. � 1001 and following. Western District Chief Judge David G. Larimer found that Kodak’s 90-day notice to Mrs. Burke was inadequate, and that she could receive some benefits both as a surviving spouse and as a domestic partner. But Larimer upheld the denial of Survivor Income Benefits, citing the failure to file the joint affidavit. And even if the SPD was deficient, Larimer said, Sally Burke could not show she relied on the SPD to her detriment. On the appeal, McLaughlin first said that Kodak’s notice on the 90-day appeal period was inadequate. The relevant language in the employee handbook instructs applicants who have been denied benefits that “if you remain dissatisfied and wish to appeal, you should, within 90 days of the date the claim was denied � write a letter to the plan administrator asking for a review.” But McLaughlin noted that Kodak uses mandatory language like “must” in at least 16 places other than the section on Survivor Income Benefits. He said the “Kodak handbook’s use of the word ‘should’ is grossly uninformative.” McLaughlin also took issue with the plan administrators’ claim that Burke’s marriage “mooted” her efforts to claim domestic partner benefits. “Regardless of timing, their interpretation of domestic partnership and spousal eligibility as mutually exclusive is arbitrary and capricious,” he said. “Such a bizarre consequence of entering into a marriage should not be left to inference.” “Finally,” McLaughlin added, “Kodak’s interpretation is not only arbitrary, but probably illegal.” The circuit went on to agree with Sally Burke that the requirement of a domestic partnership affidavit cannot be applied to her because it was not mentioned in the Survivor Income Benefits section, saying “Kodak’s SPD failed to comply with the requirements of ERISA.” Disagreeing with the lower court that the record precludes a finding of detrimental reliance, the circuit then went on to embrace the prejudice standard, and found “that the Burkes were prejudiced as a matter of law.” “Cognizant of ERISA’s distribution of benefits, we require, for a showing of prejudice, that a plan participant or beneficiary was LIKELY to have been harmed as a result of the deficient SPD,” he said. “Where a participant makes this initial showing, however, the employer may rebut it through evidence that the deficient SPD was in effect harmless error.” Judges Roger J. Miner and Rosemary S. Pooler joined in the opinion. George A. Schell and Jennifer M. Hoeling of Schell & Schell in Fairport, N.Y., represented Sally Burke. Eric J. Ward and Heather D. Kenny of Ward Norris Heller & Reidy represented Kodak.

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