Federal Reserve Disability Plan Falls Outside ERISA, But Court Applies ERISA-Style Review to Reverse Denial of Long-Term Disability Benefits

In Taylor v. Long Term Disability Income Plan for Employees of the Federal Reserve System, 2026 WL 2607035 (S.D.N.Y. Sept. 3, 2026), United States District Judge Louis L. Stanton denied the defendants’ motion for judgment on the administrative record and remanded a long-term disability claim to the plan administrator, Matrix Absence Management, Inc., finding that the denial was arbitrary and capricious. As a threshold matter, the court had previously held, in a December 2025 ruling, that ERISA does not govern this Plan, because it is a Federal Reserve System benefit plan that falls outside ERISA’s coverage. Even so, the decision is instructive for ERISA disability claimants, because the court applied the same arbitrary-and-capricious standard and the same treating-physician and cherry-picking principles that federal courts apply in ERISA cases, relying on Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003), and on Second Circuit ERISA authority. Plaintiff, a former Federal Reserve Bank of New York employee, sought reinstatement of benefits after Matrix terminated them under the Plan’s “Any Occupation” standard following a motor vehicle accident that left her with cervical and lumbar spine injuries, a rotator cuff tear, meniscus tears, and diagnosed anxiety and depression.

Why does an ERISA claimant care about a non-ERISA disability decision?

Because the standards track. The court reviewed the denial under an arbitrary-and-capricious standard, the same deferential standard that governs ERISA claims where a plan grants the administrator discretionary authority, and it drew its substantive rules directly from ERISA case law. The court cited Nord for the principle that an administrator “may not arbitrarily refuse to credit a claimant’s reliable evidence, including treating opinions,” and it drew on McCauley v. First Unum Life Insurance Co., 551 F.3d 126 (2d Cir. 2008), and Miles v. Principal Life Insurance Co., 720 F.3d 472 (2d Cir. 2013), for the rules against imposing plan standards that the plan text does not require and against selective readings of the record. The court also noted that the same Plan and the same defendants were analyzed under the same legal standard by the Sixth Circuit in Martin v. Federal Reserve Bank of Cleveland, 175 F.4th 662 (6th Cir. 2026). For practitioners and claimants tracking how courts police disability denials, the analysis is functionally identical to an ERISA review.

When does selectively gathering medical records make a disability denial arbitrary?

When the administrator collects some records but not others without a reasoned explanation. Plaintiff gave Matrix a list of eleven treating providers, but Matrix requested records from only some of them, and then declined to consider records it did receive because they predated an unexplained July 1, 2023 cutoff. The court found that this date corresponded to nothing, not the end of the “Own Occupation” period, not the start of the “Any Occupation” period, and not Matrix’s own prior record requests, and that Matrix did not even apply the cutoff uniformly across providers. The consequence was significant, because Matrix never obtained records from Plaintiff’s spine specialist even though it acknowledged that her cervical and lumbar disc disease was her primary disabling condition. The court held that Matrix acted arbitrarily by selectively contacting providers and applying an inconsistent review period without any reasoned explanation the court could identify or infer.

Can an administrator dismiss the evidence a claimant submits on appeal in a single conclusory paragraph?

No. On appeal, Plaintiff submitted a complete record, including new narrative reports from a chiropractic physician and a neurosurgeon, along with updated treatment notes. The court observed that Matrix’s thirteen-page final denial letter devoted five pages to records it had gathered before the appeal, but disposed of the newly submitted evidence in a single conclusory paragraph stating only that Matrix “disagreed” and “felt the information continued to substantiate” an ability to return to work. Because the Plan required appellate review to “take into account all available information, regardless of whether such information was submitted or considered in the initial benefit determination,” the court held that Matrix’s failure to meaningfully address the appeal records violated the Plan’s own procedures and was arbitrary and capricious. The court emphasized that the overlooked records directly contradicted Matrix’s conclusion, including findings that Plaintiff’s symptoms worsened with prolonged sitting and standing and that her ability to perform full-time gainful employment was limited.

When is a denial arbitrary because it mischaracterizes the medical record?

When the administrator cherry-picks favorable excerpts and omits contrary conclusions from the same records. The court walked through several examples. Matrix quoted one physical therapist’s findings of near-normal cervical range of motion while omitting that same provider’s conclusion that Plaintiff was “totally disabled.” It asserted that the chiropractic physician’s exams showed no weakness, when his records documented weakness in Plaintiff’s neck and hand and a limitation on remaining seated. It discounted the treating psychiatrist’s records by pointing to Plaintiff’s international travel, while ignoring that psychiatrist’s documentation of persistent limitations in daily activities and the connection between Plaintiff’s physical symptoms and her anxiety and depression. And it characterized the MRI findings as unremarkable, when the reviewing physicians read the same images to show disc herniations and stenosis and recommended spinal surgery. The court held that these mischaracterizations rested on a selective reading of the record that was not reasonably consistent with the record as a whole.

The court also rejected Plaintiff’s argument that she was entitled to a jury trial. Although her complaint labeled the claim as a breach of contract, it pleaded a single count under 29 U.S.C. § 1132(a)(1)(B) and sought reinstatement of benefits, and the court held that the constitutional right to a jury cannot depend on the choice of words in the pleadings. Finding the claim analogous to an equitable action to recover benefits, the court concluded there was no right to a jury trial. Because it had identified relevant evidence Matrix never considered, the court held that remand would not be a useless formality and remanded the claim to Matrix for reconsideration.