Catholic University Law Review
While ERISA sets forth an explicit standard that the plan administrator’s actions must meet those of a prudent man acting in like circumstances, courts have applied the arbitrary and capricious standard of review to administrator decisions. Courts should apply the arbitrary and capricious standard only when dealing with disinterested plan administrators acting properly under ERISA. The arbitrary and capricious rule was applied to post-ERISA decisions as a continuation of the pre-ERISA precedent, which established the rule through the continued development of common law from union negotiated employee benefit plans decided under the Labor Management Relations Act. Unfortunately, this continuation of judicial review marked an improper application of ERISA standards, which was passed by Congress in an effort to modify fiduciary mismanagement under LMRA and pre-ERISA employee benefit plans.
ERISA set forth specific statutory guidelines that distinguish its precedent from pre-ERISA cases and decisions made under the LMRA analogy. Congress intended ERISA to develop a separate and distinct common law of employee benefits which should be distinct from strict trust law theory. Under ERISA, courts should require de novo review in all inquiries into interested plan administrators with improper motives and in cases where the employee-beneficiary satisfies his burden of proof that the administrator was self-dealing or acting with an improper motive. This review would not have the financial and litigious consequences many have supposed, but would create a higher standard of fiduciary responsibility and increase the tendency that the plans properly pay employees, as was expressly intended and proposed by ERISA’s drafters.
George Lee Flint, Jr., ERISA: The Arbitrary and Capricious Rule Under Siege, 39 Cath. U. L. Rev. 133 (1989).