U.S. Supreme Court Fails to Protect Pension Plan Participants

The Court's ruling

In Conkright v. Frommert the Court rejected what it called a "one-strike-and-you're-out" approach. Unless plaintiffs could show that the plan administrator had acted in bad faith or would not fairly exercise his discretion, the Court ruled, then courts are bound to defer to administrator judgments

Three justices dissented. They first pointed out that longstanding trust law allows courts the option to not defer anew to a trustee's discretion or craft their own remedy when a trustee abuses its discretion, and they argued that the court's decision was a departure from that settled rule. The dissenters also noted the real-life effect of the court's decision: "The majority's approach creates incentives for administrators to take ‘one free shot' at employer-favorable plan interpretations and to draft ambiguous retirement plans … with the expectation that they will have repeated opportunities to interpret (and possibly reinterpret) the ambiguous terms," wrote Justice Breyer for the dissenters.