Troiano v. Aetna Life Insurance Company et al

Filing 45

MEMORANDUM AND ORDER: granting in part and denying in part Defendants' 15 Motion for Summary Judgment (GRANTED with respect to Counts I through IV of the Amended Complaint to the extent that those Counts relate to the SSDI offset amount; DEN IED as to Plaintiff's requested reimbursement of court and witness fees totaling $1,300); granting in part and denying in part Plaintiff's 36 Motion for Summary Judgment (DENIED as to Counts I through IV; GRANTED with respect to $1,300 in reimbursement costs related to Plaintiff's SSDI appeal). So Ordered by Judge Mary M. Lisi on 9/30/2015. (Duhamel, John)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
DEBRA TROIANO,
Plaintiff
v.
C.A. No. 14-496-ML
AETNA LIFE INSURANCE COMPANY,
GENERAL DYNAMICS
CORPORATION LONG TERM
DISABILITY PLAN, and
GENERAL DYNAMICS CORPORATION,
Defendants
MEMORANDUM AND ORDER
Since

2003,

(“Troiano”),

has

the
been

plaintiff
the

in

this

recipient

of

case,

Debra

tax-free

Troiano

long-term

disability (“LTD”) benefits under an employee welfare benefit plan
(the “Plan”) established by General Dynamics Corporation (“GDC”),
her former employer, and funded and administered by Aetna Life
Insurance Company (“Aetna,” together with GDC, the “Defendants”).
Troiano seeks a declaration from this Court that the LTD benefits
she receives, which are subject to set-off by Social Security
Disability Insurance (“SSDI”) benefits, should be reduced by the
after-tax amount of SSDI benefits she receives and not, as they are
now, reduced by the gross amount of SSDI benefits she was awarded.
The matter is before the Court on the parties’ cross-motions for
summary judgment.

1

I. Factual Background1
The facts underlying Troiano’s claims are, for the most part,
undisputed. The parties’ disagreement focuses primarily on Aetna’s
interpretation of the provision in the Policy which defines the
“Other Income Benefits” by which Troiano’s LTD benefit payments are
to be reduced.
From 1988 to 2003, Troiano, a Rhode Island resident, was an
employee

of

Electric

Boat

Corporation,

a

subsidiary

of

GDC.

Plaintiff’s Statement of Undisputed Facts (“PSUF”) ¶ 1; Defendants’
Statement of Undisputed Facts (“DSUF”) ¶¶ 1, 4. Throughout her
employment, Troiano participated in GDC’s LTD Plan, which was fully
funded through an insurance policy issued by Aetna, an insurance
company registered

to

do business

in

Rhode

Island,

with its

principal place of business in Hartford, Connecticut. PSUF ¶ 2;
DSUF ¶ 2, 3. The Plan is an “employee welfare benefits plan,”

1

The summary of facts is based primarily on the parties’
respective Statements of Undisputed Facts, to the extent those
facts are undisputed. In addition, the Court is in receipt of
various other exhibits submitted by the parties, including (1) the
Group Policy (“Policy”) funding the LTD Plan, Ex. A (Dkt. No. 15-4
at Bates Numbers TROIANO 0002-00027) to the Defendants’ Memorandum
(Dkt. No. 15) in support of its motion; (2) the Summary of Coverage
detailing LTD benefits, id. at TROIANO 00028-00035; (3) the Booklet
describing Policy coverage, id. at TROIANO 00035-00050; (4) the
Summary Plan Description, which is not formally part of the Plan,
but is given to participants to provide a description of the Plan
in non-technical language, id. at TROIANO 00051-00072, and (5) a
245-page exhibit (Dkt. No. 37-1), which includes items (1)-(4) as
well as correspondence and other documents from Troiano’s claim
file (non-consecutive Bates Numbers TROIANO 00001-32000).
2

governed by the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. §§ 1001 et seq. DSUF ¶¶ 2, 7. As required
under ERISA, GDC, as the administrator for the Plan, issued a
Summary Plan Description (“SPD”) effective January 1, 2003, which
describes the terms, conditions, and operations of LTD coverage
under the Plan. DSUF ¶ 8, 9, 18. Aetna acted for the Plan as claims
administrator regarding LTD benefits. DSUF ¶¶ 8, 1.
The Plan includes the following provisions that are relevant
to this case:
Under Section 503 of Title 1 of the Employee Retirement
Income Security Act of 1974, as amended (ERISA), Aetna is
a fiduciary. It has complete authority to review all
denied claims for benefits under this policy. In
exercising such fiduciary responsibility, Aetna shall
have discretionary authority to:
determine whether and to what extent employees
beneficiaries are entitled to benefits; and

and

construe any disputed or doubtful terms of this policy.
Aetna shall be deemed to have properly exercised such
authority. It must not abuse its discretion by acting
arbitrarily and capricious. Aetna has the right to adopt
reasonable:
policies;
procedures;
rules; and
interpretations;
of this policy to promote orderly and efficient
administration. TROIANO 00027 (emphases added).
With respect to Long Term Disability Benefits, the Summary of
Coverage provides that the Scheduled Monthly Benefit consists of
60%

of

the

beneficiary’s

monthly
3

predisability

earnings.

The

Summary notes that “([a]ny benefit actually payable may be reduced
by

‘other

income

benefits’.

The

Booklet-Certificate

contains

definitions of ‘other income benefits’, ‘adjusted predisability
earnings’, and ‘predisability earnings’.)” TROIANO 00030.
The Booklet notes that
“[i]f other income benefits are payable for a given
month:
The monthly benefit payable under this Plan for that
month will be the lesser of:
the Scheduled Monthly LTD Benefit; and
the Maximum Monthly Benefit;
minus all other income benefits, but not less than the
Minimum Monthly Benefit. TROIANO 00039 (emphasis added).
“Other Income Benefits” are defined to include “Benefits under the
Federal Social Security Act.” TROIANO 00040. As to Other Income
Benefits received in a lump sum, the Booklet provides that “[t]hese
will be broken down to a period of time equal to the lesser of (a)
the remaining benefit duration; and (b) 60 months.” TROIANO 00041.
The Summary Plan Description, which, according to Aetna, is
not

formally

a

part

of

the

Plan,

provides

plain

language

explanations and examples to inform beneficiaries of their rights
and obligations under the Plan. TROIANO 00056. The SPD specifies
that Basic Monthly Earnings are “the gross monthly pay paid to you
by the Company for performing your job in effect immediately before
the Disability begins.” TROIANO 00054. The SPD also states that
“[y]our benefit amount from the LTD Plan is reduced by any payments
you

are

eligible

to

receive

from

4

other

sources,

such

as:

...Benefits under the Social Security Act.” TROIANO 00056, see also
TROIANO 00055. It further explains that the monthly LTD benefit
payments will not be reduced over time by cost-of-living increases
in other benefits, and that benefits from other sources paid in a
lump sum “will be prorated over a 60-month period or the maximum
benefit period under the LTD Plan, if less.” TROIANO 00056.
To illustrate the impact of Social Security benefits on
reducing LTD benefit payments, the SPD contains the following
example:
Here’s an example of how the benefit reduction works.
Assume that Tom has Basic Monthly Earnings of $3,000,
bought the 60% level of coverage and becomes eligible for
LTD benefits. For purposes of this example, also assume
that he qualifies for a Social Security benefit of $600
per month.
Here’s how Tom’s LTD benefit would be paid:
$1,800 Tom’s unreduced LTD
benefit
(60% of $3,000)
- $600 Social Security Benefit
$1,200 Tom’s monthly LTD Benefit

TROIANO 00057.

The SPD also advises that
“[t]he Plan Administrator, or its agent or delegate, has
the absolute authority and sole discretion to: Interpret
the terms of the LTD Plan, including the LTD Plan’s
eligibility provisions and its provisions relating to
qualification for and payment of benefits, as well as
this
summary
plan
description,
[and]
[r]esolve
ambiguities in the LTD Plan or this summary plan
description... TROIANO 00064.

5

As a participant in the Plan, Troiano was eligible for a
scheduled monthly LTD benefit of 60 percent of her gross monthly
pre-disability earnings in the event she became disabled. DSUF ¶
13. Such monthly benefit payments were subject to reduction for
income she was eligible to receive from other sources, including
“benefits under the Federal Social Security Act.” PSUF ¶ 5, DSUF ¶¶
14, 15.
In December 2003, Troiano, having been determined to be
disabled under the Plan, began receiving benefits. PSUF ¶ 2, DSUF
¶22. TROIANO 31799. Although Aetna terminated Troiano’s benefits on
three separate

occasions,

such

terminations

were

subsequently

reversed and it is undisputed that Troiano has been deemed 100%
disabled under the Plan since 2003. PSUF ¶ 9. Troiano’s monthly LTD
benefit was set at $3,350, or 60% of her gross monthly basic
earnings of $5,583.33. DSUF ¶¶ 23, TROIANO 00054. During the course
of her disability, Aetna contacted Troiano and advised her to
pursue SSDI benefits and “appeal any denial at least through the
administrative law judge level.” PSUF ¶13, TROIANO 30929, 30926.
By letter dated June 10, 2009, Aetna advised Troiano that it
believed a Social Security application on her behalf was warranted
and Aetna offered to Troiano the assistance of a specialized claims
administration company to represent her at no cost to Troiano as
long as she continued to receive LTD benefits from Aetna. TROIANO
31766.

6

Troiano

applied

for

SSDI

in

June

2004

and,

when

her

application was denied, Troiano appealed. PSUF ¶¶ 14, 15, DSUF ¶¶
24, 25. Troiano filed suit in this Court in May 2008, appealing the
denial of her SSDI application. The claim was remanded to the
Social Security Administration (“SSA”).2 PSUF ¶ 21, DSUF ¶ 26.
On October 29, 2009, an administrative law judge determined
that Troiano had been under a disability, as defined by the Social
Security Act, since July 12, 2003. Pltf.’s Ex. 2 (Dkt. No. 37-2).
In

April

2010,

retroactively

(as

Troiano
a

lump

was

awarded

sum)

and

SSDI

benefits,

prospectively. DSUF

both
¶

26.

Pursuant to an award letter from the SSA, Troiano was entitled to
monthly benefit payments beginning in January 2004 (five calender
months after becoming disabled). TROIANO 31956. The letter advises
Troiano that she would receive a first check of $80,396 for
benefits through January 2010 and it notes that “[t]he amount you
actually receive may differ from your full benefit amount” and was
subject to reduction by, inter alia, Medicare premiums and, if
applicable, workers’ compensation offset. Id. The letter shows an
initial

monthly

benefit

amount

of

$1,783

for

January

2004,

increased by a cost-of-living adjustment (“COLA”) for each of the

2

Although the Defendants raise an objection to Troiano’s
statements regarding her appeal of the SSDI denial because it is
not supported by a citation to the record, the Court, as the Court
presiding over that appeal, takes judicial notice that the appeal
was remanded to the Commissioner of the SSA on February 25, 2009.
Troiano v. Astrue, C.A. No. 08-197-ML (D.R.I. 2008) (Dkt. No. 11).
7

following five years. Id. Further, the letter states that Troiano’s
past-due benefits are $137,825 for January 2004 through November
2009, TROIANO 31957, and it advises Troiano that fees for her
attorney are capped at $6,000. TROIANO 31958.
By letter dated April 16, 2010, Aetna informed Troiano that it
had learned of her monthly $1,783 SSDI award and of the retroactive
lump sum benefit she had been awarded. PSUF ¶ 31, TROIANO 31998.
Aetna advised Troiano that, because the Plan requires Aetna to
offset her monthly LTD benefit by the amount of the SSDI benefit,
the retroactive SSDI payment resulted in an overpayment and it
requested “[f]ull reimbursement of this overpayment by April 30,
2010.”3 PSUF ¶ 31, TROIANO 31998. Aetna also informed Troiano that
her future monthly LTD benefit payments of $3,350 would be reduced
by the SSDI benefits of $1,783 she had been awarded. TROIANO 3199832000. Aetna credited the amount of $6,000 for attorney’s fees
against the lump sum offset, reducing the amount of overpayment to
$126,526. DSUF ¶¶ 28, 29
It is undisputed that Troiano’s LTD benefits, computed on her
gross predisability income, were tax-free, whereas she was required

3

It is undisputed that Aetna made demands for prompt payment in
full even though the Plan documents specify that the reimbursement
be prorated over a sixty-month period. PSUF ¶ 31. Likewise, it is
undisputed that Aetna continued its efforts to collect the full
amount immediately, even engaging the services of a debt
collections agency. PSUF at 6 n. 2. TROIANO 31328, 20023. Such
efforts ceased when Troiano engaged counsel to represent her. Id.
8

to pay income taxes on her SSDI benefits. PSUF ¶ 30; DSUF ¶
Subsequently,

Troiano’s

counsel

requested

that

Troiano’s

LTD

benefits be offset with her net SSDI benefits. PSUF ¶¶ 34, 35.
TROIANO 31781, 31914. Following internal communications at Aetna
regarding this issue, Aetna sent a letter dated November 28, 2011
to Troiano, informing her that “[i]t is industry standard to offset
the Social Security Disability Income (SSDI) gross amount and not
the net amount. To adjust the SSDI offset, according to net amount,
would involve taxes and we do not get involved in taxation.” PSUF
¶ 39; TROIANO 20017; DSUF ¶ 36.
In an attempt to appeal Aetna’s decision to offset Troiano’s
tax-free LTD benefits (computed on Troiano’s gross predisability
income) with her gross taxable SSDI benefits, Troiano sent a letter
dated May 25, 2012 to Aetna. PSUF ¶ 40; DSUF ¶ 37. TROIANO 3098130990. Troiano further requested that future offsets from the LTD
benefits be calculated on her net SSDI payments, and she asked for
reimbursement of witness and court filing fees which she incurred
in pursuing her SSDI benefits. TROIANO 30981. Aetna did not respond
to Troiano’s letter, PSUF ¶ 41, and the record shows that, after
some internal communications, which also involved Aetna’s in-house
counsel, no further action was taken on Troiano’s letter. PSUF ¶¶
44-47. Other internal Aetna communications related to Troiano’s
request for reimbursement of court fees and witness costs indicate
that Aetna was inclined to pay such costs upon presentation of an

9

invoice or cancelled check. PSUF ¶¶ 48, 49. It is undisputed,
however, that Aetna did not inform Troiano accordingly. PSUF ¶¶51,
52. The parties agree that Aetna recouped the full amount of the
$126,526 SSDI benefit overpayment. DSUF ¶ 32. Aetna continues to
reduce Troiano’s monthly LTD benefit by the initial $1,783 SSDI
benefit, without reducing that offset for any income tax that may
be due or increasing the offset for any COLA. DSUF ¶¶ 33, 34.
According to Aetna, offsetting the SSDI benefit amount “net of” or
less any income taxes payable on such SSDI benefits would create an
unreasonable

administrative

burden

on

plan

and

benefits

administrators, a contention with which Troiano disagrees. DSUF ¶
41, Plaintiff’s Statement of Disputed Facts ¶ 41.
II. Procedural History
On November 13, 2014, Troiano filed a first complaint in this
Court, which she amended on May 14, 2015 (the “Complaint”) (Dkt.
No. 25), two months after Defendants Aetna and the General Dynamics
Corporation Long Term Disability Plan (the “Plan”) filed a motion
for summary judgment (Dkt. No. 15).4

Troiano’s five-count Amended

Complaint includes (Count I) Enforcement of Plaintiff’s Rights
pursuant to ERISA, 29 U.S.C. § 1132(a)(1)(B); (Count II) Breach of

4

Following a May 8, 2015 hearing on the matter, Troiano’s
motion (Dkt. NO. 18) to amend her first complaint was granted in
part, allowing her to include a claim for administrative penalties
against General Dynamics. Order (Dkt. No. 24). Her request to add
a claim for Equitable Estoppel against Aetna (Count V of the
proposed amended complaint, Dkt. No. 18-2) was denied.
10

Fiduciary Duty; (Count III) Clarification of Plaintiff’s Rights to
Future Benefits; (Count IV) Declaration of Plaintiff’s Rights under
the Plan; and (Count V) Administrative Penalties against General
Dynamics. Troiano alleges, inter alia, that her case should be
reviewed de novo and that, pursuant to R.I. Gen. Laws § 27-4-28
(addressing discretionary clauses in insurance policies), Aetna has
no discretion under the Plan. Troiano seeks a declaration from this
Court that her past and future LTD benefits should be offset
against the SSDI benefits she was awarded minus any income taxes
she was assessed on such benefits, and minus any expenses she
incurred in pursuing her SSDI appeal.
On March 20, 2015, Aetna and GDC filed a motion for summary
judgment (Dkt. No. 15). Subsequently, Troiano’s motion (Dkt. No.
18) to amend her complaint was granted, in part, which added Count
V for administrative penalties against GDC to her claims. On June
8, 2015, after Troiano’s motion for an order compelling production
of privileged documents and for discovery (Dkt. No. 17) was denied
(Dkt. No. 24), Troiano filed a response to the Defendants’ motion
for summary judgment (which relates only to Counts I-IV of the
Amended Complaint) (Dkt. No. 34) and a cross-motion for summary
judgment (Dkt. No. 36) as to Counts I-IV of the Amended Complaint.
Both

parties

submitted

objections

to

their

respective

motions. (Defendants, Dkt. No. 42, Troiano Dkt. No. 44).

11

cross-

III. Standards of Review
A. Cross-Motions for Summary Judgment
A party is entitled to summary judgment “if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). In deciding a motion for summary judgment, the Court reviews
the evidence in the light most favorable to the nonmoving party and
draws all reasonable inferences in the nonmoving party's favor.
Cadle Co. v. Hayes, 116 F.3d 957, 959 (1st Cir.1997).
In summary judgment, the burden shifts from the moving party,
who must first aver “‘an absence of evidence to support the
nonmoving party's case,’” Garside v. Osco Drug, Inc., 895 F.2d 46,
48 (1st Cir.1990) (quoting Celotex Corp. v. Catrett, 477 U.S. 317,
325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986)), to the nonmoving
party, who must present facts that show a genuine “trialworthy
issue remains.” Cadle, 116 F.3d at 960 (citing
Inc.

v.

Town

Maldonado–Denis

of
v.

Dedham,

43

F.3d

731,

Castillo–Rodriguez,

23

Nat'l Amusements,

735
F.3d

(1st
576,

Cir.1995);
581

(1st

Cir.1994)).
When both parties raise cross-motions for summary judgment,
the basic Rule 56 standard is not altered. Rather, it requires the
Court “to determine whether either of the parties deserves judgment
as a matter of law on facts that are not disputed.” Adria Intern.
Group., Inc. v. Ferre Development, Inc., 241 F.3d 103, 107 (1st

12

Cir. 2001)(citing Wightman v. Springfield Terminal Ry. Co., 100
F.3d 228, 230(1st Cir. 1996)); Bienkowski v. Ne. Univ., 285 F.3d
138, 140 (1st Cir.2002)(“‘The court must rule on each party's
motion on an individual and separate basis, determining, for each
side, whether a judgment may be entered in accordance with the Rule
56 standard.’ 10A Charles Alan Wright, Arthur R. Miller & Mary Kay
Kane,

Federal

Practice

and

Procedure

§

2720,

at

335–36

(3d

ed.1998).”).
B. Challenge of Determinations under Employee Benefits Plan
Troiano’s complaint, although it is styled as a declaratory
action regarding her rights under the Plan, is essentially a claim
to recover benefits she believes are due her. It is undisputed,
however, that Troiano’s application for LTD benefits was granted
and that Aetna paid to her 60% of her gross predisability income,
totaling $248,251 for the benefits period from January 1, 2004 and
March 31, 2010. TROIANO 31999. Troiano’s disagreement is thus
limited to the way her LTD payments are offset by the gross amount
of her awarded SSDI benefits.
There

is

no

dispute

between

the

parties

that

ERISA

is

applicable to the Plan, which qualifies as an employee benefit
plan, 29 U.S.C. § 1002(1); see Wickman v. Northwestern Mutual Life
Insurance Company, 908 F.2d 1077, 1082 (1st Cir. 1990)(the elements
of an ERISA plan are (1) a plan, fund, or program (2) established
or maintained (3) by an employer or by an employee organization, or

13

by both, (4) for the purpose of providing ... benefits in the even
of disability (5) to participants or their beneficiaries). 29
U.S.C. §1144 provides that ERISA supersedes “any and all State laws
insofar as they may now or hereafter relate to any employee benefit
plan described in section 1003(a) of this title and not exempt
under

section

1003(b)

of

this

title.”

29

§1144(a).5

U.S.C.

Accordingly, R.I. Gen. Laws 27-4-28, on which Troiano relies for
the proposition that Aetna has no discretion under the Plan is
preempted entirely by ERISA. Shaw v. Delta Air Lines, 463 U.S. 85,
90, 99, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983)(holding that state
statutes that relate to, and interfere with, the administration of
an ERISA governed benefit plan are preempted).
The

First

benefit-denial

Circuit

has

context,

‘the

recognized
district

that,

court

“in

sits

an

more

ERISA
as

an

appellate tribunal than as a trial court.’” Cusson v. Liberty Life
Assur. Co. of Boston, 592 F.3d 215, 223-224 (quoting Leahy v.
Raytheon Co., 315 F.3d 11, 18 (1st Cir.2002)). “In such cases,
‘summary judgment is simply a vehicle for deciding the issue,’ and,
consequently, ‘the non-moving party is not entitled to the usual
inferences in its favor.’” Id. (quoting

Orndorf v. Paul Revere

Life Ins. Co., 404 F.3d 510, 517 (1st Cir.2005)).
When an ERISA-based benefit plan gives the administrator

5

Section 1003(b) relates to several categories of plans, none
of which are applicable in this case.
14

discretionary authority6 to determine eligibility for benefits or
construe the terms of the plan, the Court is required to apply the
deferential

“arbitrary

and

capricious”

standard

of

review.

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct.
948, 103 L.Ed.2d 80 (1989);

Zarro v. Hasbro, Inc., 896 F.Supp.2d

134, 140 (D.R.I.2012). Under that “generous standard,” the Court
inquires into whether Aetna’s determinations were “reasoned and
supported by substantial evidence.” Medina v. Metropolitan Live
Ins.

Co.,

588

F.3d

41,

45

(1st

Cir.

2009)(citing

Stamp

v.

Metropolitan Life Ins. Co., 531 F.3d 84, 88 (1st Cir. 2008)).
Accordingly, as long as Aetna’s determinations and interpretations
rest on a reasonable basis, they will be upheld.
IV.

The Parties’ Positions
Aetna takes the position that its interpretation of the Plan

provision calling for an offset of gross SSDI benefits from the LTD
benefits is reasonable and supported by the plain language of the
Plan documents. It further suggests that Troiano’s interpretation
would (1) impose her own tax liability on Aetna, for which there is
no support in the Plan language; (2) preclude the orderly and
effective administration of the Plan; and (3) place an unreasonable

6

The discretionary language of the Plan provides, inter alia,
that (1) Aetna has “complete authority to review all denied claims
for benefits under this policy;” (2) it has discretionary authority
to: ... construe any disputed or doubtful terms of this policy; and
(3) “it has the right to adopt reasonable:...interpretations;...”
TROIANO 00027 (emphases added).
15

burden

on

calculation

Aetna
and

by

including

payment

of

tax

LTD

considerations

benefits.

Aetna

into

also

the

rejects

Troiano’s suggestion that the Court should apply de novo review to
her claims.
On her part, Troiano maintains that the de novo standard is
applicable because Aetna failed to respond to her “appeal” and,
thereby, failed to exercise discretion. Troiano asserts that she
was promised that her LTD Plan benefit would not be subject to
income tax; that, accordingly, it should be offset by her net SSDI
benefits; and that her interpretation of the offset provision is
the only reasonable one. Troiano also suggests that, in violation
of the Plan, she now receives less than 60% of her predisability
earnings “not subject to income tax.” Pltf.’s Mem. at 17 (Dkt. No.
37). Finally, Troiano reject’s Aetna’s assertion that reducing LTD
benefits

by

only

the

taxed

portion

of

SSDI

benefits

would

unreasonably burden Aetna as the administrator of the Plan.
V.

Discussion
At the outset, the Court notes that, notwithstanding Troiano’s

posture in this litigation, this case is not about the denial of
LTD benefits under 29 U.S.C. § 1132(a)(1)(B). It is undisputed that
Aetna approved Troiano’s disability claim and that it paid her more
than $248,251 in unreduced, non-taxed LTD benefits over a six-year
period.

Instead,

the

case

relates

solely

to

the

Plan

administrator’s interpretation of the offset provision in the Plan.

16

Aetna’s lack of response to Troiano’s request to reduce the SSDI
offset by her tax liability does not constitute a failure on the
part of Aetna to exercise its discretionary power. Under the plain
language of the Plan, Aetna is given broad discretionary powers and
authority to interpret the provisions of the Plan. Accordingly, the
de novo standard is inapplicable in this case and, unless Aetna’s
interpretation of the offset provision is unreasonable, Aetna is
entitled to deference under the arbitrary and capricious standard.
Troiano suggests that the Plan guaranties to her a tax-free
monthly benefit of 60% of her gross monthly predisability earnings,
or $3,350. Pltf.’s Mem. at 6 (“This monthly benefit—both in its
dollar amount
promised under

and
the

its

tax

Plan.”).

advantage—is
The

plain

what Ms.
language

Troiano
of

the

was

Plan,

however, does not make such promises or guarantees. It is correct
that Troiano’s LTD benefits (which were calculated on her gross,
untaxed predisability income) were not subject to income tax.
However, it was explicitly stated in the Plan, and Troiano does not
dispute, that such LTD benefits were subject to an offset against
any SSDI benefits that were “payable to her for a given month,”
TROIANO 00039, or which she was “eligible to receive.” TROIANO
00056; Pltf.’s Mem. at 14. Nothing in any of the Plan documents
suggests that Aetna would reduce the offset of such SSDI benefits
by any potential tax liability Troiano would incur as a result of
being awarded SSDI benefits.

17

The

illustrative

example

provided

in

the

SPD

uses

the

fictional beneficiary’s basic monthly earnings (defined in the SPD
as “gross monthly pay,” TROIANO 00054) of $3,000 to calculate a 60%
LTD benefit of $1,800, which is reduced by $600 because the
fictional beneficiary “qualifies for a Social Security Benefit of
$600 per month.” TROIANO 00055. Nothing in the example indicates
that this is the amount the beneficiary actually receives, nor does
the example indicate that the offset includes a calculation of any
income tax liability the recipient may incur.
Contrary to Troiano’s assertions, the SSDI offset does not
“reduce[] the value of [her] LTD Plan benefit, by nullifying the
tax advantages that the Plan provided for.” Pltf.’s Mem. at 6. From
the outset, the LTD benefits under the Plan were, under the Plan’s
plain language, subject to offset against “other income,” including
SSDI benefits. Troiano’s monthly benefit paid under the LTD plan,
“[i]f other income benefits are payable for a given month” was
defined as “the lesser of: the Scheduled Monthly LTD Benefit; and
the Maximum Monthly Benefit; minus all other income benefits, but
not less than

the

Minimum Monthly

Benefit.”

TROIANO

00039.

(Emphasis added). With respect to “other income benefits for which
you appear to be eligible,” the Plan provides that such income
benefits will be estimated by Aetna and that the LTD benefits will
be adjusted upon receipt of proof of the exact amount awarded or
“that benefits

have

been

denied

18

after

review

at

the

highest

administrative level.” TROIANO 00041.
The LTD benefits paid to Troiano after she was awarded such
SSDI benefits were not subject to income tax. They were, however,
reduced by the SSDI benefits she was eligible to receive, without
taking into consideration any income tax that was due on those
benefits. Although Troiano’s initial LTD benefits were calculated
as $3,350 (60% of her gross monthly income), it was clear under the
Plan language that the amount would be reduced, should she qualify
to receive or become eligible for “other income.” Notwithstanding
the imposition of income tax on Troiano’s SSDI benefits, her LTD
benefits, albeit reduced by the SSDI benefits she was eligible to
receive, remained untaxed. TROIANO 00053. Aetna’s confirmation to
Troiano that “the total amount from all applicable sources will not
be less than 60% of your Monthly Rate of Basic Earnings (MRBE) of
$5,583" is still accurate. According to Troiano, she receives (taxfree) $1,567 in LTD benefits from Aetna. Pltf.’s Mem. at 17,
TROIANO 32000. Troiano was also awarded an initial SSDI benefit of
$1,783. Together, her full benefit amount is $3,350, or 60% of her
pre-tax predisability income. In addition, Troiano benefits from
regular COLA increases which, under the terms of the Plan, do not
contribute to a further reduction of her LTD benefits. What Troiano
seeks

in

this

litigation

is

an

assumption

of

her

SSDI

tax

liabilities by Aetna. The LTD Plan, however, does not provide for
such a shift. Moreover, Aetna’s interpretation of the Plan’s offset

19

provision, which is given considerable deference, is bolstered by
its

contention

that

including

a

calculation

of

each

Plan

participant’s varying (among participants and for each participant,
from

year

to

circumstances)

year
income

and

depending

tax

on

liability

changes
would

be

in

personal

unreasonably

burdensome and preclude the orderly and effective administration of
the Plan.
In light of the plain language of the Plan with respect to
“other income” offset, the deference due to the interpretation of
the Plan by the Plan Administrator, and the clearly burdensome
consequences of factoring individual income tax consequences into
the process, Troiano’s suggestion that “[a]t the very least, [her]
interpretation is one reasonable interpretation of the Plan,”
Pltf.’s Mem. at 23, is insufficient to withstand the Defendants’
motion for summary judgment.
Finally, with respect to Troiano’s request for reimbursement
of $1,300 in court filing fees and witness fees she incurred in
pursuing her appeal for SSDI benefits, the record indicates, and
Aetna appears to acknowledge, that such reimbursement is available
to Troiano upon presentation of an invoice and/or canceled check.
Accordingly, Troiano is due reimbursement of $1,300, provided she
produces

the

applicable

documentation

therefor.

20

to

support

her

claims

Conclusion
For the reasons stated herein, the Defendants’ motion for
summary judgment with respect to Counts I through IV of the Amended
Complaint is GRANTED to the extent those Counts relate to the SSDI
offset amount. The motion is DENIED as to Troiano’s requested
reimbursement of court and witness fees totaling $1,300. Troiano’s
cross-motion for summary judgment on Counts I through IV is DENIED,
in part, and GRANTED with respect to $1,300 in reimbursement costs
related to her SSDI appeal.

SO ORDERED.
/s/ Mary M. Lisi
Mary M. Lisi
United States District Judge
September 30, 2015

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