ERISA plan’s 3-year limitations period for judicial review of adverse benefit determination is enforceable, Supreme Court rules

An ERISA plan’s three-year limitations period for judicial review of an adverse benefit determination is enforceable, a unanimous U. S. Supreme Court has ruled. The long-term disability plan’s limitations provision, which required that any lawsuit to recover benefits pursuant to the judicial review provision in ERISA Sec. 502(a)(1)(B) be filed within three years after “proof of loss” was due, was reasonable. In addition, there is no controlling statute that prevents the provision from taking effect. As such, the Court affirmed the Second Circuit’s decision that a plan participant’s claim for benefits was untimely because she filed her action outside the policy-prescribed, three-year statute-of-limitations period.

The plan participant contended that even if the plan’s limitations provision was reasonable, ERISA is a “controlling statute to the contrary.” She argued that the limitations provision would undermine ERISA’s two-tiered remedial scheme—i.e., the internal plan review and the judicial review. The Court rejected arguments that plan participants would shortchange their own rights during the internal review process in order to have more time in which to seek judicial review. Participants who failed to develop evidence during internal review risked forfeiting the use of that evidence in district court. In addition, participants were not likely to value judicial review of plan determinations over internal review. The Court further rejected the argument that allowing plans to set limitation periods to begin to run before internal reviews were complete would endanger the judicial review process. In response to the suggestion that administrators might delay the resolution of claims in bad faith, the Court noted that administrators are required by regulations to take prompt action on claims and failure to meet deadlines on processing claims results in the penalty of immediate access to judicial review for participants. Furthermore, the plan’s limitations provision at issue is common, and 40 years of ERISA administration suggested that the good-faith administration of internal review would not diminish the availability of judicial review.

Source: Heimeshoff v Hartford Life & Accident Insurance Co. (US Sup Ct).

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer’s Benefits Reports.

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