ERISA Claim is Time-barred in Spite of Disclosure Violation

August 4, 2006 ( - The 9th US Circuit Court of Appeals ruled that, though a pension plan violated its duties under the Employee Retirement Income Security Act (ERISA) to provide an employee with reasons for its denial of benefits and a reasonable opportunity for review, the participant had reason to know his benefits denial was final.

In its opinion, the court applied a determination from an Oregon case, which established a six-year statute of limitation period for Kenneth Chuck to bring his benefits claim to court. Chuck argued the statute of limitation period never commenced because his employer, Hewlett Packard (HP), failed to provide him with the explanations of his change in benefits or plan documents he requested in writing.

According to the opinion, “an ERISA cause of action accrues either at the time benefits are actually denied or when the insured has reason to know that the claim has been denied.” The court determined Chuck had reason to know his claim had been denied by March 1992. He did not file his lawsuit until 11 years later, in 2003.

The court cited in its opinion its reasons for determining the ERISA cause of action began in March 1992:

  • Chuck admitted he knew, even before resigning in 1980, that HP was going to take the position he was not eligible for further pension benefits beyond those to which he was entitled at the decreased vesting rate.
  • As early as January 1981, a plan administrator sent Chuck a letter affirming the decrease in his vesting credit. HP did not subsequently waver in its position.
  • Chuck had actual notice that a lump sum payment, if made, would constitute his only payment option. He also had notice that his acceptance of payment by lump sum would be irrevocable.
  • Chuck subsequently accepted the plan’s check constituting a lump sum payment in the amount set by HP. There is no indication in the record that Chuck’s acceptance of that check was conditioned on the reservation of his claim to greater benefits.
  • When Chuck raised the issue again with HP, a plan administrator sent Chuck a letter in March 1992, noting that the plan had paid Chuck his benefits in 1981 and that “[n]o further retirement benefits are payable from our U.S. plans.”

Chuck worked for HP from 1968 to 1972 and again from 1974 to 1980. Up to 1979, HP calculated his pension benefit as if he had no break in service, providing him with annual statements reflecting that calculation.

According to the court opinion, prior to his resignation in 1980, HP recalculated his pension benefit considering his break in service. Chuck questioned the change with HP several times and was told his benefit amount had been corrected and he was not due any additional pension benefits.

However, after Chuck received his lump sum payout from the plan, several requests for an explanation of the change and certain plan documents were ignored by HP.

Chuck filed suit in US District Court, which granted summary judgment in favor of HP. The appellate court agreed, saying the suit was filed after the statute of limitations for an ERISA claim. The court also noted that Chuck was no longer a participant or eligible to bring a claim against the plan since he had received his benefits.

The opinion in Chuck v. Hewlett Packard Co. is here .