How much can a Plan Adminstrator w/ Discretionary Authority Xercise b4 it's abuse of authority

Hello All:

GENERAL QUESTION not based on a specific example. In General Terms, for DB Plan Administrators who are granted "discretionary authority" by their  Plan Documents, how much can they allow "exceptions" to written rules in the Plan's documents or Instruments before they face potential liability( i.e. potential litigation)  for abuse of discretionary authority? THANKS IN ADVANCE!

The discretionary authority is generally to interpret the rules of the plan that may be ambiguous in a consistent manner not to make exceptions to the written terms of the Plan Document, that typically requires a plan amendment.

This is not legal advise and I am not a lawyer.

An important starting point for an ERISA-governed plan’s administrator or other fiduciary is: “[A] fiduciary shall discharge his duties with respect to a plan . . . in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this title [I] and title IV.” ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D).

A plan’s governing document might grant the plan’s administrator some discretionary authority to construe or interpret ambiguities in the plan’s text. But that is not authority to deviate from what the plan provides.

Further, if a governing document’s grant of discretionary authority to interpret the plan is, ostensibly, so wide that it would allow an administrator other fiduciary to ignore or vary a plan provision, a fiduciary is duty-bound not to apply that portion of the discretion that would be inconsistent with ERISA’s command: “Every employee benefit plan shall be established and maintained pursuant to a written instrument.” ERISA § 402(a)(1), 29 U.S.C. § 1102(a)(1).

This is not advice to anyone.

Lou and Peter are spot on. Discretion for consistent and reasonable interpretation of vague plan provisions, not for exceptions. Also, a vague provision does not give carte blanche on interpreting any way the PA desires, it must still be reasonable.

I've read many lawsuit summaries where the PA was sued alleging its interpretation was arbitrary and capricious (legal term for willy nilly).