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DATE POSTED 16. 11. 2016, By

ERISA Court Ruling – Is A Pension Benefit Payable When Participant Dies Before Annuity Start Date?

Look Into A Past ERISA Ruling With A Pension Plan Attorney Chicago

In O’Shea v. UPS Retirement Plan, No. 15-1923 (1st Cir. 2016), Brian O’Shea delayed his official retirement date in a unique manner after he was diagnosed with cancer. He worked for the United States Parcel Service of America, Inc. (UPS). During his 37 years working there, he participated in the UPS Retirement Plan.

In 2008, Brian O’Shea found out that he had cancer. Fortunately, he was coming up on retirement in 2009, so he let human resources at UPS know that he would be retiring at the end of 2009. HR advised him to take advantage of the seven weeks he had accrued in vacation and personal time. While this maximized his payroll time, it also delayed his official retirement date. When they advised him, the UPS human resource department was not aware of his medical diagnosis.

Application for Retirement

Brian O’Shea put in his application for retirement on January 7, 2010, which was also the last day of work for him. On his application, he designated that the start date for his annuity would be March 1, 2010, which was the day after what he thought was his official retirement date of February 28, 2010. The payment form that he chose was “Single Life Annuity with 120-Month Guarantee” and his children were named as beneficiaries.

Must Be Alive on Annuity Date

It is most likely due to the fact that UPS human resources did not expect Brian O’Shea to die before his annuity date, but he was never told that the payments were contingent on him being alive. In fact, this important stipulation was not in the application, either. On February 21, 2010, merely one week prior to his official retirement date and eight days before his start date for his annuity, Brian O’Shea passed away.  

Refusal to Pay Benefits & Lawsuit

Because of the retirement Plan’s rule that he had to survive until his annuity start date, the Plan refused to pay benefits to anyone. The only thing the Plan was willing to offer was a survivor annuity for Brian O’Shea’s spouse, if one existed. His four children were offered nothing, so they decided to take the Plan to court. They claimed that the pension benefit should be paid to them, because they were documented as beneficiaries by Brian O’Shea before he died.

Court Decision

The district court, however, decided that the Plan was correct in not paying the benefits, because Brian O’Shea was still an active employee and had not made it to his retirement date yet. The court found that in the Plan’s Section 5.4(d)(iii), it was stated that “if I die within the 10-year guarantee period…” The court concluded that Brian O’Shea should have understood, according to this clause of the Plan, that if he died before the annuity start date, his beneficiaries would not receive any payments under the Plan.

So, the court decided for this particular Plan that if an employee dies before an annuity start date, the pension benefits are not payable. At Roberts Bartolic LLP, we remain up to date on ERISA court cases and how they turn out so we can best represent our clients. Contact us today if you have questions about your ERISA benefits at (312) 635-1600 .

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