Background
Sherry Yali Liu sued Kaiser’s pension plan and Kaiser Foundation Health Plan after they denied her claim to $676,980.77 in pension benefits earned by her sister, Ya-Xia Liu. While hospitalized with cancer and requiring around-the-clock care, Ya-Xia requested submission of an online form electing a lump-sum rollover and naming Liu as beneficiary. Ya-Xia died three days later.
Kaiser concluded that Ya-Xia completed the first step but died before confirming her information and acknowledging required notices in a second step derived from Kaiser’s administrative practice. Kaiser also determined that substantial compliance could not support an ERISA benefits claim. The district court dismissed Liu’s complaint with prejudice for failure to state a claim.
The Court’s Holding
The Ninth Circuit held that the state-law doctrine of substantial compliance is available under ERISA for benefit elections, just as circuit precedent had applied it to attempted beneficiary changes. The court also clarified that the Supreme Court’s decision in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan did not eliminate the doctrine when a participant attempts to effectuate her intent through the plan itself.
Applying California law at the pleading stage, the panel concluded that Liu plausibly alleged that Ya-Xia did all she reasonably could under the circumstances. The complaint alleged that Ya-Xia used Kaiser’s designated form while gravely ill, completed the first step without defect, and died before she could perform further confirmations. The panel reversed the dismissal and remanded for further proceedings; it did not decide that Liu was ultimately entitled to the benefits.
Key Takeaways
- Substantial compliance may support an ERISA claim involving a benefit election, not only an attempted beneficiary change.
- Kennedy does not foreclose substantial compliance when a participant attempts to carry out her intent through the plan’s own mechanism.
- Liu plausibly alleged substantial compliance, but entitlement to the pension benefits remains unresolved on remand.
Why It Matters
The decision confirms that an ERISA administrator may not reject a benefits claim based on the categorical legal premise that substantial compliance is unavailable for benefit elections. Whether the doctrine applies depends on the governing state-law standard and the participant’s efforts under the circumstances.
The ruling is limited to the sufficiency of Liu’s allegations and this Plan’s requirements. It allows her claim to proceed without conclusively establishing a valid election, beneficiary designation, or right to payment.