In Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604 (2013), the U.S. Supreme Court unanimously held that an ERISA plan can include a reasonable “contractual statute of limitations” that shortens the default time period for bringing an ERISA benefits lawsuit.  In so ruling, the Court not only gave ERISA defendants a potent procedural defense to tardy benefits lawsuits, but also reaffirmed its long-standing reverence for adhering to the written plan terms, even if the result is painful to claimants.  

Three federal circuit courts of appeal, however, have narrowed the scope of this rule in recent months.  Notwithstanding Heimeshoff’sstated reverence for adhering to ERISA plan terms, these courts have held that to be able to enforce a plan limitations provision, an ERISA fiduciary must clearly notify claimants of the limitations period in the claim denial letter.  Most recently, in Mirza v. Ins. Adm’r of Am., Inc., No. 13-3535, 2015 U.S. App. LEXIS 15068 (3d Cir. Aug. 26, 2015), the U.S. Third Circuit Court of Appeals followed the Sixth Circuit (which sits over Ohio’s federal courts) in adopting that rule.  

In Mirza, the plan contained a one-year statute of limitations.  The denial letter sent to the claimant advised him of his right to file a lawsuit, but did not mention the plan’s one-year limitations period.  Citing ERISA regulations requiring such letters to contain a “description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action,” the Third Circuit held that the fiduciary was required to include the limitations period in the letter.  According to the court, to hold otherwise would allow ERISA fiduciaries to “easily hide the ball and obstruct access to the courts.”  Because the fiduciary in Mirza failed to include the limitations period in the denial letter, the plan’s one-year limitations period did not apply.

The effect of having a plan limitations period set aside in that manner would undermine the chances of obtaining the early dismissal of stagnant benefits claims in most cases.  Because ERISA itself doesn’t provide a statute of limitations for benefits claims, absent a plan limitations provision, courts apply the forum state’s breach of contract statute of limitations to benefits claims.  In many states, those periods are often lengthy (for example, Ohio’s limitations period is eight years).  Most ordinary benefits claims could be filed within such lengthy periods, so absent an enforceable plan limitations provision, successfully asserting a time-based defense to such claims is difficult, if not impossible in most cases. 

All in all, we continue to believe, as we did when we analyzed theHeimeshoff decision in this article, that ERISA plans should adopt a term containing a reasonable limitations period to limit the plan’s liability for stale claims.  But now that more courts are holding as the Third Circuit recently did in Mirza, fiduciaries should also ensure that their form appeal denial letters specifically detail such limitations periods.  More broadly, these cases underscore the principle that fiduciaries must scrupulously adhere to ERISA’s claims adjudication regulations and procedures to get the benefits afforded by ERISA’s otherwise deferential standard of judicial review.  Consequently, ERISA fiduciaries and plan sponsors should periodically review their plans’ overall claims procedures for compliance with ERISA.