Background

• Schultz and Kelly sued under ERISA to recover long-term disability benefits after offsets for Social Security benefits were applied.
• The plans offset private disability benefits by Social Security benefits including those paid to dependents (children) of the disabled employee.
• Schultz and Kelly argued that child Social Security benefits based on a parent’s disability are not “loss of time disability” benefits and thus cannot be offset.
• The district court held that children’s SSA benefits counted as loss of time benefits and dismissed the case for failure to state a claim.
• The Seventh Circuit reviews de novo a Rule 12(b)(6) dismissal when no discretionary authority is given to interpret the plan, and affirms the district court’s interpretation of the offset provisions.
• The court treated the Aviall and Perkins Coie plans together due to substantially similar offset language and focused on whether child benefits are offsets under the plans.

Issues

Key Cases Cited

• Carstens v. U.S. Shoe Corp.'s Long-Term Benefits Disability Plan, 520 F. Supp. 2d 1165 (N.D. Cal. 2007) (offsets to children contemplated by plan language)
• In re Unisys Corp. Long-Term Disability Plan ERISA Litig., 97 F.3d 710 (3d Cir. 1996) (dep. children SSA benefits discussed; support vs. income not decisive)
• Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482 (7th Cir. 1996) (insurer as proper defendant under ERISA not dispositive)
• Fortune v. Group Long Term Disability Plan for Employees of Keyspan Corp., 391 F. App’x 74 (2d Cir. 2010) (offsets of loss of income include dependent benefits)
• Califano v. Goldfarb, 430 U.S. 199 (U.S. 1977) (Social Security dependents replacement income purpose)
• Hopkins v. Cohen, 390 U.S. 530 (U.S. 1968) (dependent benefits tied to primary disability)