Firestone Deference Clause
(Employee Benefit Plan)

Summary

Use this Firestone deference clause in an employee benefit plan subject to the Employee Retirement Income Security Act (ERISA) to grant the plan administrator binding authority to interpret and make determinations under the plan and therefore receive deferential review in the event of a legal challenge. This template includes practical guidance and drafting notes. In the landmark case, Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the Supreme Court clarified that the applicable standard of review for an ERISA claim may depend on whether the governing document grants the relevant authority to the plan administrator. Without express language in the plan, a plan administrator’s determinations (e.g., the decision to deny a participant’s benefit claim) will be subject to de novo review in an ERISA lawsuit. However, when the plan explicitly provides that the administrator has the power to determine eligibility for benefits or construe the term’s of the plan, the more deferential abuse of discretion standard generally applies. Note that some states’ insurance laws ban or restrict such language for insured health plans and insurance policies (to the extent not preempted by ERISA). In addition to having a Firestone clause in the plan document, you should include corresponding language in the summary plan description. Failure to put participants on notice regarding the administrator’s discretionary authority may result in loss of judicial deference. See, e.g., Lyn M. v. Premera Blue Cross, 2020 U.S. App. LEXIS 23395 (10th Cir. 2020) (notwithstanding the presence of a Firestone clause in plan document, de novo standard applied where claimant did not receive notice regarding the discretionary provision (e.g., in an SPD) or sufficient information regarding the plan document); see also Prichard v. Metro. Life Ins. Co., 783 F.3d 1166 (9th Cir. 2015). For a listing of key content regarding the ERISA review standard, litigation and claims, see ERISA Claims and Litigation Resource Kit. For a full listing of key content covering ERISA retirement plan investments, see ERISA Retirement Plan Investment Resource Kit. For a Firestone clause that can be used in a summary plan description, see Firestone Deference Clause (Summary Plan Description). For further information, see Standard of Review and Deference in ERISA Litigation and Why is the term "Arbitrary and Capricious" So Important in Relation to Disability, Life, Accidental Death, and Medical Benefits from an Employer-Sponsored Benefit Plan?. For a discussion of Firestone’s impact outside of denial of benefit claims, see “Comment: Illusory Rights Under the Arbitrary and Capricious Standard: Adding Remedial Safeguards to the Judicial Standard of Review Beyond ERISA Denial of Benefits Claims,” 11 Seton Hall Cir. Rev. 392, ARTICLE: ABUSING ABUSE OF DISCRETION: JUDICIAL REVIEW OF ERISA FIDUCIARIES' DISCRETIONARY DECISIONS IN DENIAL OF BENEFITS CASES, 27 Hofstra Lab. & Emp. L.J. 105, and Article: Divided Loyalties: How the Metlife v. Glenn Standard Discounts ERISA Fiduciaries' Conflicts of Interest, 2009 Utah L. Rev. 955.