In short, the Supreme Court approved a ruling from the U.S. District Court for the District of Connecticut, and upheld by the 2nd U.S. Circuit Court of Appeals, that permits qualified retirement plans to specify a deadline by which participants must file suit for such things as reclaiming denied benefits.
The decision comes out of Heimeshoff v. Hartford Life & Accidental Insurance Co. (No. 12–729.), in which plaintiff and former Walmart employee Julie Heimeshoff argues that ERISA plans should not be allowed to impose a limitations period that begins before the claimant exhausts administrative remedies and is able to file suit.
In the case, Heimeshoff argued that permitting the limitations period to begin before administrative remedies have been exhausted could allow the limitations period to waste away while the claimant goes through the plan’s administrative review process (see “High Court to Rule on Litigation Limitations Period”).
According to the Defense Research Institute (DRI) in Chicago, which filed an amicus brief in the case, the insurance policy funding Walmart’s benefits plan, issued by The Hartford, required Heimeshoff to submit proof of loss by December 8, 2005, and included a contractual three-year limitations period, which began to run from the date proof of loss was due. Heimeshoff’s suit challenging her denial of benefits was not filed until November 18, 2010.
The firm argues in its amicus brief that the provisions of the plan were unambiguous and agreed to by all parties, thereby implying the case should be dismissed. Other observers agreed, and warned that a ruling in favor of Heimeshoff could open the door for significant additional litigation against ERISA plans.
The U.S. District Court for the District of Connecticut agreed with The Hartford and dismissed the case on the grounds it was barred by the plan’s three-year limitations period. The 2nd Circuit affirmed.
After agreeing to review the case in October, the Supreme Court decided that, while appellate court precedent requires participants in an employee benefit plan covered by ERISA to exhaust the plan’s administrative remedies before filing suit to recover benefits, and that a plan participant’s cause of action under ERISA §502(a)(1)(B) therefore does not accrue until the plan issues a final denial, it does not follow that a plan and its participants cannot agree to commence the limitations period before that time.
To support the decision, the high court points to a ruling set forth in an earlier case, Order of United Commercial Travelers of America v. Wolfe (331 U. S. 586, 608), which provides that a contractual limitations provision is enforceable for ERISA plans so long as the limitations period is of reasonable length and there is no controlling statute to the contrary.
Another important factor in the decision was the Supreme Court’s understanding that the plan’s period is not unreasonably short. That’s because applicable regulations push for mainstream claims to be resolved by plans in about one year. In this case, the plan’s administrative review process required more time than usual, but still left Heimeshoff with approximately one year to file suit.
Therefore, Heimeshoff’s reliance on yet another ERISA-related case (Occidental Life Ins. Co. of Cal. v. EEOC), in which the Supreme Court declined to enforce a 12-month statute of limitations applied to Title VII employment discrimination actions where the Equal Employment Opportunity Commission faced an 18- to 24-month backlog, is unavailing in the absence of any evidence that similar obstacles exist to bringing a timely ERISA §502(a)(1)(B) claim.
The complete text of the Supreme Court’s decision, including an introductory syllabus, is available here.