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U.S. Food Service, Inc. v. Truck Drivers & Helpers Local Union No. 355 Health & Welfare Fund, No. 12-1108

Decided: November 30, 2012

The Fourth Circuit Court of Appeals reversed the district court’s ruling that employer contribution funds in an Employment Retirement Savings Income Act (“ERISA”) health plan should be returned due to a mistake of fact or law.  The district court ruled that the plan administrator’s determination that the funds were not due to a mistake was incorrect, but the Fourth Circuit held that the administrator’s decision was within its discretion and remanded the case.

ERISA provides that benefits of a health plan “shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan.”  However, ERISA permits return of an employer contribution only after the plan administrator determines that an employer’s contribution was due to a mistake of law or fact.  The plan in question stems from a collective bargaining agreement (“CBA”) between Teamsters Local No. 355 and United Food Services (“USF”).  USF makes contributions to the unions ERSIA health and welfare fund for the benefit of its employees.  The contributions are based on the “straight time-hour” rate of hours worked by an employee with a maximum of 50 hours per week.  USF and its predecessors have been a party to this fund since 1957 and the contribution agreement has not changed since then.  Benefits Administration Company (“BAC”) manages the day-to-day operations of the fund, and only allows for return of USF contributions based on a mistake as provided for by ERISA.  In March of 2008, USF discovered that from January 2006 until March of 2008, USF had contributed funds paid at the overtime rate.  USF interpreted the CBA to require “straight time-hour” payments, which did not include the overtime rate.  In March of 2008, USF halted the allegedly mistaken contributions and requested a return of the overpayments.  The administrator interpreted the CBA to mean USF must pay at the applicable contribution rate up to 50 hours a week, even if that included an overtime rate.  USF filed suit in the district court, and the district court agreed with USF that the “clear and unambiguous” language of the SBA only required contributions at the regular hourly rate.  Furthermore, the district court granted the return of funds to USF.

The Fourth Circuit looked to the two ERISA provisions and held that the mechanism for return of mistaken funds gave the plan administrator broad discretion to determine if funds should be returned.  The Court stated that Congress wanted to strike a balance between a system that was too restrictive or too lax to both encourage contribution and protect the financial stability of funds.  Because of this, the Court agreed with other circuits that held an administrator’s decision should be evaluated for abuse of discretion, which is synonymous with deference.  Therefore, it is the plan administrator, not the reviewing court, which determines first whether a given contribution was made by mistake and whether it should be returned to the contributing employer.  Because the CBA language has not changed in 50 years, and because the administrator focused on course of dealing between the two parties, the administrator’s decision was not an abuse of discretion.

Full Opinion

-Jonathan M. Riddle