QUESTION: Can our ERISA employee benefit plans impose a deadline for participants or beneficiaries to file a lawsuit if they wish to challenge a final administrative determination under our plans’ claims procedures?
ANSWER: Yes, plans can impose a deadline for filing lawsuits, if certain conditions are met. As background, essentially all legal claims must be filed within a certain period of time, referred to as a limitations period or, when established by law, a statute of limitations. Generally, claimants (participants or beneficiaries) will not be able to challenge an adverse plan decision in court if they do not file a lawsuit by the applicable deadline—the court will dismiss the suit as untimely. Because ERISA does not provide a specific statute of limitations for benefit claims, courts typically apply the statute of limitations for the most analogous state-law claim (often breach of contract), with the result that the deadline for filing benefit lawsuits may vary from state to state unless the plan specifies a limitations period. A plan is permitted to specify the time period within which claimants must bring a lawsuit (which may be shorter than the period under the otherwise applicable statute of limitations), so long as the time period is reasonable and there is no controlling statute to the contrary.
By imposing a reasonable deadline under the terms of the plan, you may be able to create a uniform limitations period, avoiding otherwise lengthy statutes of limitations and state-to-state variations. Here are some key considerations in implementing a limitations period:
What Is Reasonable? Whether a plan’s limitations period is reasonable is determined by the court hearing the claim. While there is no rule as to a limitations period’s length or when it begins, courts that have considered the issue have provided some guidance. Several courts have enforced plan-imposed limits of three years; others have found a one-year limit reasonable. One appellate court even enforced a plan-imposed limit of 90 days where, among other things, the limit was in line with other plan provisions designed to quickly process claims and the plan’s internal appeals process was completed before the lawsuit was filed. The limitations period typically begins when the plan administrator issues a final claim denial (giving rise to the claimant’s right to bring an ERISA lawsuit), but it might be measured from a different date. For example, the U.S. Supreme Court enforced a three-year limitations period measured from the proof-of-loss date under a long-term disability plan (proof of loss being the evidence of disability that must be submitted with a claim). A shorter period measured from a proof-of-loss date, however, might not be reasonable.
What Notice Is Required? Whether and what kind of notice is required regarding a plan-imposed limitations period also varies among the courts. Many will only enforce the plan’s limitations period if it has been disclosed, although some courts will enforce such a plan provision even absent disclosure. An explanation of the plan-imposed limit in the SPD might satisfy some courts, whereas others will require that the deadline be specified in the benefit denial notice. We strongly recommend that plan-imposed limitation periods be prominently described in the plan’s SPD and in notices of adverse benefit determination. Plan-imposed limitations that are ambiguous or misleading are not likely to be enforced, so you will want to make sure the terms in your plan document, SPD, and notices are clear, consistent, and unambiguous. Also, make sure to adhere to applicable procedures when amending plans to include such a provision.
If your plan document establishes a reasonable deadline for filing a suit, and it is communicated in your plan’s SPD and notices of adverse benefit determination, you may be successful in having the court dismiss a claimant’s lawsuit if it was not filed by the deadline.
For more information, see EBIA’s ERISA Compliance manual at Section XXXVI.E (“Time Limits for Filing Benefit Claims: Statute of Limitations”) and EBIA’s 401(k) Plans manual at Section XXXVII.B.3.e (“Modifying Limitations Periods Through Plan Provisions”). See also EBIA’s Self-Insured Health Plans manual at Section XXVI.J (“Litigation Issues”).
Contributing Editors: EBIA Staff.