On December 28, 2021, the Eleventh Circuit Court of Appeals (Eleventh Circuit) affirmed a lower court's decision granting summary judgment in favor of Allstate Insurance Company ('Allstate') in an ERISA class action lawsuit. The case, Klaas v. Allstate Ins. Co., was brought by two groups of retirees who challenged Allstate's decision to stop paying their life insurance premiums.
For several decades, Allstate offered eligible employees life insurance benefits that continued into retirement. The summary plan descriptions (SPDs) provided to employees described the retiree life insurance benefits as 'provided at no further cost' to the retiree. Additionally, employer representatives described the benefits, both orally and in writing, as 'paid up' and 'for life.' However, the SPDs contained reservation-of-rights provisions that allowed Allstate to change, amend or terminate the plan at any time. The SPD language also specified that participants and beneficiaries did not have vested rights in the plan's benefits.
In 2013, Allstate decided to stop paying the life insurance premiums for employees who retired after 1990. Allstate chose 1990 as the cut-off date because no SPD before that time contained a reservation-of-rights provision. The change was scheduled to take effect at the end of 2015 and was communicated in advance to the affected retirees. In response, the retirees brought the ERISA class action lawsuits, in which they claimed Allstate denied plan benefits to which they were entitled and violated fiduciary duties by making written and oral misrepresentations about the benefits.
The lower court granted summary judgment in Allstate's favor on both claims. The retirees appealed the decisions to the Eleventh Circuit, which affirmed the lower court's ruling.
The Eleventh Circuit's decision centered upon the language of the SPD, which they noted was statutorily established by ERISA as the primary document for communicating the plan benefits and terms to participants. In the court's opinion, the SPD language 'unambiguously' gave Allstate the right to change, amend, or terminate the plan at any time. As a result, the court found it unnecessary to consider extrinsic evidence, such as representations by Allstate employees, to interpret the SPD terms. The SPD also explicitly stated that employees did not have vested rights to plan benefits. Accordingly, the court concluded that the retirees failed to demonstrate a denial of any benefits due under the plan terms. Additionally, the court found the retirees' breach of fiduciary duty claims time barred.
For employers, the opinion emphasizes the importance of ensuring the SPD language clearly reflects when plan benefits are non-vested and subject to future change or cancellation. The decision also serves as a reminder that employer benefit communications, whether oral or in writing, should be consistent with the SPD.