In the latest installment of a long-running litigation, a federal district court has held that retirement benefits must be calculated without regard to an offset that was not disclosed in the summary plan description (SPD). When John Layaou left Xerox in 1983, he received a lump sum distribution of his pension plan benefits. He was rehired in 1987, and subsequently laid off in 1994. During his second period of employment he earned additional pension benefits. However, the Xerox pension plan reduced those subsequent benefits by an offset based on his previous distribution and by an imputed earnings amount on that previous distribution. After his administrative claim to the plan was denied, Layaou filed suit. The district court granted summary judgment to the defendants but, on appeal, the Second Circuit held that, as a matter of law, the failure of the SPD to adequately describe the offset violated the disclosure rules of the Employee Retirement Income Security Act (ERISA). On remand, the district court held that because the plan document and the SPD were inconsistent, the SPD would control, and therefore the retirement benefit must be recalculated without using that offset. The court noted, however, that the SPD had mentioned that previous distributions would be taken into account for subsequent distributions. Consequently Layaou’s benefits were to be computed under the plan’s formula, but without regard to the previous distribution, and the amount of the previous distribution was then to be subtracted from the amount of the recalculated benefit.
Source: Layaou v. Xerox Corp., No. 95-CV-6388l (W.D.N.Y. July 29, 2004). Howard Pianko, Epstein Becker & Green e-mail: hpianko@ebglaw.com