SDNY Holds Discovery Limited to Administrative Record for Federal Reserve LTD Plan Governed by State Contract Law

In Taylor v. The Long Term Disability Income Plan for Employees of the Federal Reserve System, et al, No. 25 CIV. 01134 (LLS), 2025 WL 3640397 (S.D.N.Y. Dec. 16, 2025), the U.S. District Court for the Southern District of New York granted defendants’ motion to limit discovery to the administrative record, holding that benefit determinations under the Federal Reserve’s long-term disability plan are reviewed under an arbitrary and capricious standard pursuant to New York contract law. Because the plan is a “governmental plan,” it is exempt from ERISA, but the court emphasized that longstanding state-law principles still impose significant deference where a plan confers discretionary authority on the administrator.

The plaintiff sought long-term disability benefits under a plan sponsored by the Federal Reserve System and administered by Matrix Absence Management, Inc. After Matrix denied the claim following administrative appeals, the plaintiff sued seeking benefits and argued that she was entitled to discovery beyond the 2,600-page administrative record. The court disagreed, explaining that where a non-ERISA plan unambiguously vests discretionary authority in the decision-maker, judicial review is limited to whether the denial was made in bad faith, was arbitrary or capricious, or resulted from fraud.

Relying on both New York law and Second Circuit precedent, the court held that benefit determinations must be reviewed based solely on the information available to the administrator at the time the decision was made. Evidence outside the administrative record, including medical records not submitted during the claim process, could not have influenced the decision and was therefore irrelevant to the court’s review.

The court also rejected the plaintiff’s argument that applying an arbitrary and capricious standard improperly imported ERISA-style deference into a plan Congress expressly exempted from ERISA. Instead, the court characterized the standard as a product of contract law, grounded in the parties’ agreement and supported by decades of state and federal case law addressing discretionary benefit plans.

Finally, the court held that generalized allegations of a structural or financial conflict of interest were insufficient to establish “good cause” for discovery beyond the administrative record. Absent specific allegations of procedural irregularities—such as biased decision-makers, inadequate review procedures, or defects in the appeal process—the plaintiff was not entitled to expanded discovery. The court granted defendants’ motion but noted that the plaintiff could later seek to supplement the record upon a showing of case-specific good cause.

Claimant-Side Takeaway

For claimants, Taylor serves as a cautionary reminder that courts will rarely permit discovery as a means of curing deficiencies in the administrative record. Where a plan grants discretionary authority, the window for building a viable case effectively closes once the administrative appeal process ends. Claimants who proceed without submitting comprehensive medical evidence, functional assessments, and responses to adverse reviews risk having their claims evaluated under a deferential standard with no opportunity to supplement the record later. The decision reinforces the strategic value of early counsel involvement, particularly in governmental or non-ERISA plans where contract principles may impose deference comparable to ERISA’s arbitrary-and-capricious review.