The Ninth Circuit provided significant guidance for the district court to consider regarding a conflict of interest involving self-funded plans in Burke w. Pitney Bowes Inc. Long-Term Disability Plan 544 F.3d 1016 (9th Cir. 2008). While the district court ruled in favor of the plan, it reached its decision prior to the Supreme Court’s decision in Glenn. The Ninth Circuit therefore remanded the matter for the district court to consider the potential conflict of interest in light of Glenn. In doing so, the court rejected the proposition that a structural conflict of interest cannot exist where a plan is self-funded, with benefits paid out of trust. The court held that even when benefits are paid out of a trust, instead of directly by an employer, the employer has a financial incentive to deny claims because every dollar not paid in benefits is a dollar that will not need to be contributed to fund the Trust. The court explained: “although there is no dollar-for-dollar correlation, it still remains true that the more that the Trust pays out in benefits, the more the plan must contribute to maintain the Trust’s solvency.”

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This entry was posted by Adam V. Russo on Wednesday, May 13th, 2009 at 3:06 pm and is filed under 9th, Conflict of Interest. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.