Litigation involving benefit claims can be varied and unpredictable in the best circumstances. But the challenges reach another level when an employee benefit plan must deal with a ten-year-old claim. Memories fade, personnel change and records get lost. Worse, health plans and others may face unexpected financial exposure, not to mention legal bills, that can affect their ability to serve their participants.
Plans can try to reduce their exposure to such challenges by adopting a clear, reasonable limitations period--the length of time in which a legal action can be brought. Five years ago, the Supreme Court made clear that plan provisions setting a limitations period are appropriate and enforceable. In the years since, courts have fleshed out the framework the Court laid out, providing detail on practices plans should consider when adopting and implementing a limitations period.
A well-designed limitations period provision can protect plans and their fiduciaries while ensuring that claimants' rights are protected. Plan trustees and administrators should consider whether to have a limitations period at all, how long to set the period, how and when to communicate information about the provision to claimants, and how to implement such rules. (1)
The question of what limitations period applies when a participant sues a benefit plan or its fiduciaries can be complex and critically important. This is particularly true for plans with participants in multiple states. The Employee Retirement Income Security Act of 1974 (ERISA) does not set forth limitations periods for certain types of suits, including benefit claims, and courts typically borrow from state statutes of limitations. In the past plans have sought to address this issue by specifying a limitations period in the plan document itself.
A limitations period provision simply governs how long a claimant can wait before suing an employee benefit plan. ERISA contains specific limitations periods for fiduciary claims--A plaintiff must sue no later than six years after the triggering event or three years after he or she has actual knowledge of a breach, with some exceptions. (2) But ERISA is silent for nonfiduciary suits such as health benefit claims, claims of interference with ERISA rights or document request claims. Courts therefore look to state law and "borrow" limitations from the most analogous statute. The result is a patchwork of limitations periods ranging from one to ten or even 15 years. (3) Litigation may arise over what limitations period even applies--State law may be unclear, the plan and participant may be in different states, or the suit may involve multiple plaintiffs.
To avoid the need to consult state law, a plan may specify that a claimant must bring suit within a certain period after a triggering event (such as a claim denial) or within a certain period after completing the internal appeals process. Courts have long upheld such provisions, though courts in different jurisdictions have varied in their approach. Some required that the state law authorize the period, while others held that the period could not begin before a plan finally denied a claim and appeal. (4)
In 2013, the Supreme Court substantially reduced the uncertainty surrounding plan limitations periods through its decision in Heimeshoff v. Hartford Life & Accident Insurance Co. (5) The specific question involved when the limitations period could begin. The Court held that the clock could start running before the internal appeals process ended, so long as it left a reasonable period after the process ended. More broadly, the Court signaled that courts should generally apply plans' limitation periods, noting that "[t]he principle that contractual limitations provisions ordinarily should be enforced as written is especially appropriate when enforcing an ERISA plan."
Why Include a Limitations Period?
Specifying a limitations period in a plan has a number of clear benefits. (6)
* Uniformity. Having a single limitations period offers a particularly compelling advantage for plans that operate across numerous states. But even smaller plans may...