Those of us who are sports fans know that timekeepers can control the outcome of any football game. On December 16, 2013, the U.S. Supreme Court announced that an ERISA plan’s own contractual limitations period for filing claims will be enforced unless the time period specified is “unreasonably short’ or ‘[where] a controlling statute’ prevents the limitations provision from taking effect.” In a case where an employee sought long-term disability (“LTD”) plan benefits after the three year time limit set out in the LTD plan, writing for a unanimous court, Justice Clarence Thomas concluded: “Neither condition is met here.” Heimeshoff v. Hartford Life & Accident Insurance Co., No. 12-729, 571 U.S. ___, 134 S. Ct. 604 (2013). The plan’s own statute of limitations was enforced because the Supreme Court views ERISA plans as contractual arrangements:
“The principle that contractual limitations provisions ordinarily should be enforced as written is especially appropriate when enforcing an ERISA plan. The plan, in short, is at the center of ERISA. [E]mployers have large leeway to design disability and other welfare plans as they see fit. And once a plan is established, the administrator’s duty is to see that the plan is maintained pursuant to [that] written instrument. This focus on the written terms of the plan is the linchpin of a system that is [not] so complex that administrative costs, or litigation expenses, unduly discourage employers from offering [ERISA] plans in the first place.”
(Internal quotes and citations omitted.)
In determining that the limitations period at issue was not unreasonably short, the Supreme Court noted that applicable regulations indicate most claims should be resolved within a one-year time period. Here, the plan’s administrative review process required more time than usual but still left Heimeshoff with approximately one year to file suit, which the justices found to be a “reasonable” period of time.
ERISA plan sponsors should consider adopting plan-based statutes of limitations. For plan sponsors who decide to include a contractual limitations provision, the plan should define when a lawsuit must be filed and ensure the limitation is imposed in the plan, the summary plan description and any communications with the participant.
While the U.S. Supreme Court’s decision applies to claims for plan benefits under ERISA section 502(a)(1)(B), it does not apply to breach of fiduciary duty claims, for which ERISA provides the statute of limitations.