You already know that ERISA regulations require the plan administrator to render a decision on an administrative appeal within 45 days.

If more time is needed, the ERISA regulations require that the plan administrator notify the beneficiary before the 45 day period expires that more time is needed due to special circumstances.

BUT what should be in the plan administrator’s notice letter to the beneficiary indicating more time is needed?

Here’s the case of Dimery v. Reliance Standard Life Ins. Co., slip op. 12-17550 (9th Cir. March 11, 2015)(unpublished).

FACTS: Dimery sought disability benefits under Genentech’s ERISA-governed plan. Reliance notified Dimery that it wanted an independent medical evaluation, but did not expressly state it needed additional time beyond the 45 day period. On the 64th day, Reliance affirmed the decision terminating Dimery’s benefits.

Dimery sued for wrongful denial of benefits, and argued Reliance’s failure to provide a decision within 45 days required the court to apply de novo review, rather than “abuse of discretion” review.

ISSUE: Whether the plan administrator’s failure to provide adequate notice beyond the 45 day appeal period changes the standard of review to de novo review rather than “abuse of discretion” review?

NINTH CIRCUIT HELD: Abuse of Discretion Review Applied, Despite the Untimely Decision (Due to Inadequate Notice).

  1. 29 C.F.R. § 2560.503-1(i)(1)(i), (i)(3)(i) requires the plan administrator to render a decision on an administrative appeal of a denial of benefits within 45 days. Extra time is allowed if the administrator provides notice before the 45 day period expires that additional time is required due to special circumstances. Op. at 2.
  2. The court found that the plan administrator’s notice letter was insufficient. Op. at 3.
  3. However, “ERISA procedural violations do not alter the standard of review unless violations cause the beneficiary substantive harm.” Op. at 3. “‘[P]rocedural violations of ERISA do not alter the standard of review unless those violations are so flagrant as to alter the substantive relationship between employer and employee….’” Op. at 3.
  4. Also, there was no evidence the denial of benefits was “necessarily the mechanical result of a violation of the terms of the Plan.” The Plan did not state that a particular result would ensue from a failure to adhere to the time limits for reviewing the denial of benefits. Op. at 3
  5. Finally, Dimery failed to identify “any substantive harm resulting from Reliance’s untimely decision.” Op. at 3

KEY TAKE AWAY: The notice letter to the beneficiary should expressly state: (1) when the 45 day period expires, and (2) why more time is needed.

How about those Gonzaga University Bulldogs (Men’s Team and Women’s Team) in the Sweet Sixteen?