Reported / Citable
Background
Before her death, a Kaiser employee allegedly elected to take earned pension benefits as a lump sum and named her sister, Sherry Yali Liu, as beneficiary. Kaiser concluded that the employee had begun but not completed the plan’s election and beneficiary process, and it denied Liu’s claim for the pension proceeds.
Liu sued under the Employee Retirement Income Security Act, the federal law governing most private employee-benefit plans. Kaiser argued that only strict compliance with the written plan could create the benefit and that the equitable doctrine of substantial compliance could not rescue an incomplete election. The Northern District of California dismissed the complaint at the pleading stage.
The Court’s Holding
The Ninth Circuit reversed. It held that California’s substantial-compliance doctrine may apply to an ERISA benefit election just as it can apply to a change of beneficiary. Under that doctrine, a court asks whether the participant clearly intended the change and took positive action reasonably similar to what the plan required, even if every technical step was not completed.
The Supreme Court’s instruction that ERISA plans be administered according to plan documents did not eliminate the doctrine. The Ninth Circuit had continued to apply substantial compliance after that decision, and extending the principle from beneficiary changes to a lump-sum election followed the same logic. Liu plausibly alleged enough facts to proceed, though she still must prove substantial compliance and entitlement to benefits on remand.
Key Takeaways
- Substantial compliance remains available in the Ninth Circuit for ERISA disputes governed by California law.
- The doctrine can cover the participant’s form-of-benefit election, not only a beneficiary designation.
- A claimant must show clear intent plus affirmative steps that closely approximate the plan’s required procedure.
- Plan-document principles do not necessarily require dismissal where the participant’s alleged actions may satisfy substantial compliance.
Why It Matters
The ruling gives beneficiaries and estates a path forward when a participant unmistakably tried to complete a pension election but died or became unable to finish a technical step. California employment and benefits lawyers should preserve portal records, forms, communications, and plan instructions that show both intent and concrete action.
Plan administrators should still follow written terms consistently, but they should assess whether state-law substantial compliance applies before treating an incomplete transaction as automatically void. The case concerns pleading sufficiency, so factual development on remand remains critical.