ERISA is a complicated statute intended to preempt state laws that relate to employee benefit plans. So why didn't they include a statute of limitations that specifies the time within which to file suit in Federal court for a denied benefit claim? Well, they didn't and so throughout the history of ERISA, federal courts have looked to state law to apply a limitations period within which a claim for denied benefits must be brought in Federal Court.
Federal Courts have traditionally applied the applicable state's limitations period for written contracts. Sometimes that can be quite a long period. For example, in Kentucky, the statue of limitations for bringing an action on a written contract is 15 years.
Fortunately for plan sponsors and administrators, a plan may, in its written terms, specify its own statute of limitations. Courts will generally enforce a written self-imposed statute of limitations so long as it is reasonable and is communicated to participants.
A recent decision from the Federal Second Circuit Court of Appeals upheld the application of a three year statute of limitations that began to run before the claimant could have filed an action in Federal Court (see Burke vs. Pricewaterhousecoopers LLP Long Term Disability Plan, decided July 9, 2009 and for the record, Judge Sotomayor did not participate in this decision). According to the opinion, the Fifth, Sixth, Seventh and Eighth Circuits have also allowed plan specific limitation periods to start running before the claimant could file an action in Federal Court.
Most plans contain a requirement that a claimant has to first exhaust the plan's administrative claim review process before filing an action for benefits in Court. In this particular case, the plan specific three year period began to run 30 days after presentment of a proof of loss under the plan was due. As a point of interest, the case arose in New York and the applicable state law statue of limitations would have been six years, but for the shorter period within the plan document.
The claimant in this case was held to be time-barred from filing an action in Federal Court because of the way the plan's provisions defined the time the limitations period began to run. If the limitations period had not started until after the appeal was denied, then the claimant's action would have been timely and could have proceeded in Federal Court.
One thing that a plan sponsor can control about plan claims is the period of time within which an action for a denied claim has to be filed in Court. All plan sponsors should consider writing and communicating to participants a plan specific statute of limitations period.