Reliance Standard Properly Offset LTD Benefits by Lump-Sum Pension Despite IRA Rollover, Montana District Court Holds

In McLeod v. Reliance Standard Life Insurance Co., No. CV 22-87-BLG-SPW, 2026 WL 1133684 (D. Mont. Apr. 27, 2026), the United States District Court for the District of Montana adopted a magistrate judge’s findings and recommendation, granted summary judgment to Reliance Standard Life Insurance Company (“Reliance Standard”), and rejected the plaintiff’s challenge to the offset of her long-term disability (“LTD”) benefits by the amount of a lump-sum pension distribution she rolled into an Individual Retirement Account (“IRA”). The decision, brought under the Employee Retirement Income Security Act of 1974 (“ERISA”), turned on the meaning of “you” in the governing group policy and on the application of the contract-interpretation doctrine of contra proferentem.

McLeod worked as an operator at CHS, Inc. (“CHS”), a refinery in Billings, Montana, beginning in March 2007. As a member of United Steel Workers Local 11-443 (the “Union”), she participated in Reliance Standard’s Group Long Term Disability Plan, which the Union held as Policyholder under Group Policy No. LTD 130695 (the “Policy”). Following a stroke in January 2020, McLeod became disabled and began receiving $4,000 per month in LTD benefits. She subsequently elected to take a lump-sum pension distribution of $75,701.89 from CHS and directed the proceeds into an IRA. Reliance Standard then notified McLeod that it would reduce her monthly benefit by $1,261.70, citing the Policy’s “Other Income Benefits” provision, which deducts “Retirement Benefits” from gross monthly LTD payments. After Reliance Standard denied her administrative appeal, McLeod filed suit in August 2022.

On cross-motions for summary judgment, Magistrate Judge Kathleen L. DeSoto recommended granting Reliance Standard’s motion. Although the parties initially litigated under the abuse-of-discretion standard, Judge DeSoto observed that the Policy contained no grant of discretionary authority and that de novo review therefore governed. Neither party objected to that conclusion. McLeod did, however, object to the substantive recommendation, arguing that under de novo review the doctrine of contra proferentem applied and that any ambiguity in the Policy should be resolved in her favor.

Judge Susan P. Watters overruled the objection. The court explained that contra proferentem operates only after ordinary contract-interpretation principles fail to resolve the parties’ intent. Citing Kunin v. Benefit Trust Life Insurance Co., 910 F.2d 534 (9th Cir. 1990), and Lamps Plus, Inc. v. Varela, 587 U.S. 176 (2019), the court reiterated that an ERISA plan’s terms must be read in their ordinary and popular sense and harmonized so that no provision is rendered nugatory.

The dispute centered on the Policy’s definition of “you,” which encompasses “[t]he Policyholder and any subsidiaries, divisions, or affiliates.” Reliance Standard argued that CHS qualifies as an “affiliate” of the Union under standard dictionary definitions, making the CHS-funded pension a “Retirement Benefit[] paid for by you” subject to offset. McLeod countered that “you” referred only to the Union and urged the court to import a definition of “affiliate” drawn from a Reliance Standard privacy notice—”[c]ompanies related by common ownership or control”—which would exclude CHS.

The court found no ambiguity to resolve. McLeod’s narrow reading of “you” would render the Policy’s eligibility provisions illogical: the Schedule of Benefits requires that an insured be an “active, Full-time employee” working for “you” a minimum of 30 hours per week. If “you” referred only to the Union, only Union employees—not CHS workers like McLeod—could qualify for coverage, a result inconsistent with the parties’ shared understanding that McLeod was insured. The court further observed that the Policy’s definition of “Retirement Benefits” expressly references “money which the Insured is entitled to receive…under…an employer’s retirement plan,” language that McLeod’s interpretation would read out of the contract entirely.

The court likewise rejected McLeod’s reliance on a Schedule of Benefits notation listing affiliates “to be covered” as “None.” That language defined the scope of insured persons—reflecting that CHS employees who were not Union members did not have coverage—rather than the meaning of the defined term “affiliate.” CHS could qualify as an affiliate of the Policyholder for purposes of the offset provision without itself being a covered entity.

McLeod separately argued that Reliance Standard’s earlier handling of a different CHS employee’s claim, Kenyon v. Reliance Standard Life Insurance Co., No. CV 25-11-TJC (D. Mont.), demonstrated inconsistency in its application of the offset. The court found that Kenyon—dismissed with prejudice in March 2026—did not control. Citing Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009), the court reaffirmed that “a claim for benefits stands or falls by the terms of the plan,” and that an earlier inconsistent administrative determination cannot displace the Policy’s plain language.

Finally, the court found no clear error in Judge DeSoto’s determination that McLeod “received” the pension distribution within the meaning of the Policy when she rolled the lump sum into an IRA. The court accordingly adopted the findings and recommendation in full, granted Reliance Standard’s motion for summary judgment, denied McLeod’s motion, and dismissed the action with prejudice.