In Mirza v. Insurance Administrator of America, Inc., the Third Circuit Court of Appeals ruled that plan administrators must inform claimants of plan-imposed deadlines for judicial review in their notifications denying benefits. The decision imposes a new requirement on employers in the Third Circuit that have plan-imposed deadlines for judicial review and serves as a guide for employers in other circuits to ensure compliance with ERISA.
Section 502(a) of ERISA authorizes a participant or beneficiary to bring a civil action to recover benefits due under the terms of a plan. There is no statute of limitations provided under Section 502(a) of ERISA and, therefore, courts have found that Congress delegated this authority to plan administrators and fiduciaries to come up with their own deadlines for judicial review. Where there is no plan-imposed deadline, courts apply the most analogous state-law claim. Where a deadline is imposed under the plan, such a deadline must be reasonable.
Mirza involved an employer who sponsored an ERISA plan that required a claimant who received an adverse initial benefit decision to appeal that determination through an internal review process. Once the claimant exhausted that process and received a final decision from the plan administrator, the claimant had one year to bring a legal action for benefits. At issue was an employee, Mirza, who submitted a claim for $34,000. That claim was initially denied and then again denied after the completion of the internal review process. At the end of the August 12, 2010 adverse determination letter, Mirza was informed of his “right to bring a civil action under ERISA § 502(a)” if he was not content with the final decision. However, neither the August 12, 2010 letter nor any of the earlier denials mentioned that, under the plan, Mirza had one year from the date of the August 12, 2010 denial to seek judicial review.
Mirza did not ultimately bring suit until March 8, 2012 – almost 19 months after the August 12, 2010 denial letter. As a result, the District Court ruled in favor of the employer – finding that the claim was time-barred in light of the plan’s one-year limitations period.
The Third Circuit Court of Appeals focused its analysis on the issue of whether the employer violated its regulatory obligations by failing to include the plan-imposed one-year time limit for seeking judicial review in the letter denying Mirza’s request for benefits.
The regulations under ERISA require that any adverse benefit determination include 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 under section 502(a) of the Act following an adverse benefit determination.”
The Court of Appeals ruled that the regulation at issue should be construed broadly and in favor of Mirza because ERISA is a remedial statute and noted that both Courts of Appeals to have addressed the issue (the Sixth Circuit in 2014 and the First Circuit in 2011) have required disclosure of the plan-imposed time limit. In addition, practical considerations supported such an interpretation of the regulation, as imposing a requirement on plan administrators to inform claimants of deadlines for judicial review in documents that they are likely to actually read (i.e., adverse benefit determinations) results in only a trivial burden.
The Court of Appeals also limited its ruling to plan-imposed time limits and expressed no view on the application of the regulation to ERISA plans that are silent as to limitations periods and thus borrow from analogous state-law claims.
The disclosure of a reduced time limitation in a denial letter ensures a fair opportunity to review by making it readily apparent to a claimant that he or she may only have one year – or even less than that – before the claim must be brought to the court. Accordingly, under Mirza, ERISA requires that adverse benefit determinations set forth any plan-imposed time limit for seeking judicial review and any notification that does not include such time limit is not in substantial compliance with ERISA.
As noted above, ERISA does not provide a limitations period for filing a claim under Section 502(a) and, therefore, where there is no plan-imposed limitation, the courts borrow the statute of limitations from the most analogous state-law claim. All parties agreed that the default limitations period for Mirza’s claim was six years, which is the deadline for filing a breach of contract action under New Jersey law. Due to the fact that the employer in Mirza did not include the plan-imposed time limit, they were found to have violated the governing regulation and, therefore, New Jersey’s six-year deadline for breach of contract actions was determined to be the appropriate limitations period. As Mirza’s suit was filed within 19 months of the adverse benefit determination, Mirza’s claims were not time-barred.
Employers in the Third Circuit who impose a limitation under their ERISA plan for bringing a civil action must be sure to disclose this plan-imposed time limit on any adverse benefit determination issued under the plan. In addition, as this rule has previously been adopted by the Sixth Circuit and First Circuit, employers throughout the country who impose such limitations may wish to include this information in their adverse benefit determinations going forward in order to ensure compliance with ERISA and the continued enforceability of the plan-imposed time limit.