Lorenzen v. Employees Retirement Plan of the Sperry & Hutchinson Co.

Warren Lorenzen was a sales manager and long-term employee of Sperry & Hutchinson Company, Inc. (S & H). Warren was eligible to retire on February 1, 1987, but was persuaded to stay on until July 1, 1987, to complete a company project. Warren elected to receive his retirement benefits as a lump sum rather than as an annuity to be paid as a series of monthly payments for the remainder of his life, followed by monthly payments to Warren’s wife, Delvina Lorenzen (plaintiff), in half that amount if Delvina survived him. Delvina signed a written consent form, agreeing to the lump-sum option, as required by the terms of the Employees Retirement Plan of the Sperry & Hutchinson Company (plan) (defendant). The plan summary explained that if a participant who elected the lump-sum option died after age 55 but before retirement, the participant’s spouse or other beneficiary would receive a benefit in the amount of 40 percent of the lump-sum equivalent of the benefits earned by the participant. Two weeks before Warren’s extended retirement date, Warren suffered a cardiac arrest. While still hospitalized, on June 27, 1987, Warren suffered a second cardiac arrest and was placed on life support. Warren’s physicians advised Delvina that his condition was hopeless and that he should be taken off life support. Delvina followed the doctors’ recommendation, and Warren died the same day. If Warren had survived until his extended retirement date of July 1, 1987, he would have received the entire lump-sum benefit of $192,000. Instead, the plan advised Delvina that, as Warren’s widow, she was entitled to a preretirement death benefit in the amount of $89,000. Delvina filed suit against the plan, and the district court awarded her summary judgment in the amount of $192,000. The plan appealed.