Firestone Deference Clause
(Summary Plan Description)

Summary

Use this Firestone deference clause in the summary plan description of an employee benefit plan subject to the Employee Retirement Income Security Act (ERISA) to notify participants that the plan administrator has 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. This clause must reflect corresponding language in the plan document. 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). For a Firestone provision to use in a plan document, see Firestone Deference Clause (Employee Benefit Plan). For further information, see Standard of Review and Deference in ERISA Litigation. 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. For additional information about SPD requirements, see Summary Plan Description Rules for ERISA Benefit Plans and the Summary Plan Description Resource Kit. For a full listing of key content covering ERISA retirement plan investments, see ERISA Retirement Plan Investment Resource Kit.