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McElroy v. Smithkline Beecham Health & Welfare Benefits Trust Plan for U.S. Employees

August 06, 2003

PAUL F. MCELROY, APPELLANT
v.
SMITHKLINE BEECHAM HEALTH & WELFARE BENEFITS TRUST PLAN FOR U.S. EMPLOYEES; SMITHKLINE BEECHAM; UNUM PROVIDENT CORPORATION



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. No. 01-cv-05734) District Judge: The Honorable Herbert J. Hutton

Before: Scirica, Chief Judge, Sloviter, and Nygaard, Circuit Judges.

The opinion of the court was delivered by: Nygaard, Circuit Judge.

PRECEDENTIAL

ARGUED May 21, 2003

OPINION OF THE COURT

In this disability benefits case, appellant Paul McElroy, who had been an employee of SmithKline Beecham, challenged the plan administrator's interpretation of the SmithKline Beecham Long Term Disability Plan. The plan administrator concluded that certain Railroad Retirement Board disability benefits ("RRB benefits") should be deducted from McElroy's long-term disability payments. The District Court granted summary judgment in favor of SmithKline, holding that the plan administrator's reading of the Plan – that the offset for "state disability benefits or similar government benefits" includes McElroy's RRB benefits – was reasonable. We agree with the District Court, and will therefore affirm.

I.

From 1965 until 1996, McElroy worked for Consolidated Rail Corporation as a computer system analyst. In 1996, McElroy left Conrail to work for SmithKline Beecham's Clinical Laboratories. The benefits package provided by SmithKline included basic long-term disability benefits. The Plan provided that the following disability payments received by the beneficiary would offset the SmithKline disability payment "dollar for dollar": (1) Primary Social Security benefits; (2) Worker's Compensation or Occupational Disease Law; (3) State disability benefits or similar government benefits; and (4) Benefits received from the SmithKline Beecham Pension Plan. At issue here is the phrase "State disability benefits or similar government benefits."

Because of a heart condition, McElroy became disabled in February 1997, at which time he filed a claim with SmithKline for long-term disability benefits. When SmithKline denied the claim, citing a pre-existing condition, McElroy appealed SmithKline's denial and brought suit against SmithKline in 1999. The parties settled in July 2000, and McElroy was reinstated to the SmithKline Plan.

By this time, McElroy had begun receiving a disability annuity of $2,023.15 pursuant to the Railroad Retirement Act, as a result of his prior employment with Conrail. SmithKline notified McElroy that the plan administrator had concluded that these RRB benefits triggered an offset to reduce his disability payments.

McElroy appealed the plan administrator's decision, but the plan administrator denied the appeal, concluding that because the RRB benefit payments were a "similar government benefit" under the Plan, they should be deducted from the Plan payment. McElroy initiated this lawsuit in the United States District Court for the Eastern District of Pennsylvania. The District Court granted SmithKline's motion for summary judgment and denied McElroy's cross-motion for summary judgment.

II.

Before we can evaluate the propriety of the plan administrator's determination, we must decide whether the District Court properly applied the deferential "arbitrary and capricious" standard of review. The Supreme Court has instructed us to review the determination of a plan administrator de novo unless "the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for ...


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