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Payne v. Pentegra Defined Benefit Plan for Financial Institutions

United States District Court, S.D. Indiana, Indianapolis Division

September 30, 2016

JENNIFER A. PAYNE, Individually and as Personal Representative of the Estate of Mark R. Payne, Plaintiff,



         This matter is before the Court on a Motion for Summary Judgment filed pursuant to Federal Rule of Civil Procedure 56 by Defendants Pentegra Defined Benefit Plan for Financial Institutions and Plan Administrator of the Pentegra Defined Benefit Plan for Financial Institutions (collectively, “Pentegra”) (Filing No. 71). After being denied retirement benefits on behalf of her late husband, Mark R. Payne (“Mr. Payne”), Plaintiff Jennifer A. Payne (“Mrs. Payne”) asserted a claim to recover benefits under § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., (“ERISA”). After successfully moving to dismiss all but one of Mrs. Payne's claims, Pentegra filed a Motion for Summary Judgment on November 9, 2015, asserting that the Board of Directors' denial of retirement benefits was not arbitrary or capricious and was in accordance with the Pentegra Defined Benefit Plan (“Pentegra DB Plan”). For the following reasons, the Court GRANTS Pentegra's Motion for Summary Judgment.

         I. BACKGROUND

         A. Factual Background

         Mr. Payne, the late husband of Plaintiff Mrs. Payne, worked for more than thirty years for the Federal Home Loan Bank, which was merged into the Office of the Comptroller of the Currency (“the OCC”). Mr. Payne worked as a field manager in the Indianapolis, Indiana office and, as an employee, was a participant in the Pentegra DB Plan which is a non-profit, IRS qualified, tax-exempt, pension plan and trust through which Federal Home Loan Banks, Saving and Loan Associations and similar institutions, or any other federally insured financial institution may cooperate in providing for the retirement of their employees. The OCC engaged or assigned the Pentegra DB Plan to Pentegra, as the third-party administrator of the Pentegra DB Plan.

         While employed by the OCC, Mr. Payne was diagnosed with a brain tumor in December 2010. After his first surgery on December 27, 2010, the Paynes learned that Mr. Payne's tumor was a gliablastoma tumor, the deadliest type of brain tumor. Mr. Payne's physicians informed him that the life expectancy for this type of tumor was approximately twelve to sixteen months. During the next fifteen months, Mr. Payne endured two additional surgeries as well as weeks of radiation and chemotherapy. Tragically, Mr. Payne also experienced seizures, memory loss, difficulties in speech and comprehension, and other neurological deficits prior to his death on March 5, 2012.

         Shortly after Mr. Payne's diagnosis in December 2010, the Paynes began working with Valerie Waller (“Ms. Waller”), the Lead Expert for Compensation and Benefits at the OCC's office in Washington, D.C., to discuss Mr. Payne's life insurance and pension benefits. Mr. Payne wanted to ensure that his wife and their two children would be taken care of after his death. The Paynes sought advice from Ms. Waller regarding the full impact of their options under the Pentegra DB Plan. The Paynes and Mr. Payne's supervisor, Jill Hoyle (“Ms. Hoyle”), communicated with Ms. Waller regularly to discuss questions and to confirm information related to Mr. Payne's life insurance and the Pentegra DB Plan.

         On January 1, 2011, Pentegra sent Mr. Payne a statement of his annual retirement benefits, explaining that his active service death benefit, as of January 1, 2011, was $691, 332.00, when expressed as a single payment. In October 2011, Mr. Payne requested that Ms. Waller provide pension calculations as of November 1, 2011 and April 1, 2012, so that the Paynes could understand their various options. Mr. Payne also requested that all options be explained to him in detail. The Paynes wanted this information to decide which option would benefit them the most. In mid-October 2011, Mr. Payne received an estimate of the pension benefits from Pentegra and Ms. Waller. The estimated pension benefit for early retirement on November 1, 2011, was a lump sum payout of approximately $975, 557.00, or an annuity of approximately $57, 480.00. The Paynes decided that the annuity was the best option as it provided a lifetime payout to Mrs. Payne.

         In January 2012, the Paynes, Ms. Waller, and Ms. Hoyle participated in a telephone conference call regarding Mr. Payne's options. During the call, Ms. Waller advised Mr. Payne to wait 120 days before he filed for a disability retirement. Ms. Waller explained there was no reason for Mr. Payne to retire earlier than the 120 days. However, Ms. Waller failed to advise the Paynes that the pension figures would differ substantially if Mr. Payne died while in active service rather than after he retired. When the benefits calculation was eventually provided by Pentegra, Ms. Waller admitted that she did not know there would be a significant difference in benefits based on retirement. Ms. Waller was incorrect in her understanding when she advised the Paynes in January 2012.

         Mr. Payne died on March 5, 2012, while he was still in active service with the OCC. He did not retire prior to his death. Because of this, the Pentegra DB Plan never received a termination form from the OCC indicating that Mr. Payne had terminated employment prior to the date of his death. On March 15, 2012, ten days after Mr. Payne died, Mrs. Payne spoke with Ms. Waller and Damien Samuals (“Mr. Samuals”), another OCC employee, regarding Mr. Payne's pension benefits. Ms. Waller explained that the annuity payout had not been calculated but stated that it would not be significantly different from the information that was sent to the Paynes in October 2011. Ms. Waller specifically stated that it would not be “significantly less” and that it would be “a little less, but not significantly” different.

         In April 2012, Mrs. Payne received the benefits calculation from Pentegra. The lump sum benefits that would be paid were more than $200, 000.00 less than the estimate that was provided in October 2011. After learning that the benefits would be significantly less than what the Paynes were told in October 2011, Mrs. Payne participated in a conference call with Ms. Waller, Mr. Samuals, and Lynn Phillips (“Mr. Phillips”), a representative of Pentegra, to discuss why there was such a large discrepancy in benefit payments. Mr. Phillips explained that the discrepancy resulted from the difference between a retirement benefit versus an active death benefit. He explained that an active death benefit yielded a much lower benefit payment than a retirement benefit. When Mrs. Payne expressed her surprise at the large difference between the two types of benefits, Ms. Waller also stated that she was not aware that the two types of benefits yielded such a significant difference. Mrs. Payne asked whether the fact that Mr. Payne did not retire, but died in service, cost her more than $200, 000.00 in lump sum benefits. Mr. Phillips confirmed that it did. Mr. Payne had decided not to retire, relying on the faulty advice of Ms. Waller.

         The Paynes frequently talked with Ms. Waller who knew of Mr. Payne's imminent death and who was the individual most knowledgeable about benefits at the OCC's office. The Paynes relied on Ms. Waller's advice regarding Mr. Payne's retirement and benefits. Additionally, the Paynes relied on the benefits calculations provided by Pentegra. Because Mr. Payne died while in active service with the OCC instead of retiring before his death, Mrs. Payne was entitled to approximately $205, 000.00 less in lump sum benefits.

         As the beneficiary of Mr. Payne's estate, Mrs. Payne filed a written claim with the Administrator of the Pentegra DB Plan on December 27, 2012, pursuant to the disputed claims procedure in the summary plan description of the Pentegra DB Plan. She requested the additional $205, 000.00, asserting that because the Paynes relied on the advice of Ms. Waller, Mrs. Payne was entitled to retirement benefits rather than the active service death benefits. This disputed claim was denied on March 22, 2013. In denying the claim, Pentegra explained that Mr. Payne was in active service at the time of his death, rather than retired, because Mr. Payne did not terminate his employment with the OCC prior to his death, and thus, he was entitled to active service death benefits, not retirement benefits. Pentegra also explained that the active service death benefits had been described to the Paynes in the January 2011 statement as well as the retirement benefits in the October 2011 correspondence.

         On May 22, 2013, Mrs. Payne requested that the Pentegra DB Plan Board of Directors (“the Board”) review the denial of the December 27, 2012 claim. On October 10, 2013, Pentegra responded to Mrs. Payne and explained that the Board had reviewed and upheld Pentegra's decision to deny the claim for retirement benefits. Pentegra explained the reasons for the Board's denial of the claim and noted ...

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