On August 7, the U.S. Court of Appeals for the Sixth Circuit decided in Moyer that the contractual time limits governing the period during which a participant must initiate judicial review of a benefits denial must be included in the denial letter issued by the plan administrator in order to comply substantially with the requirements of Section 503 of the Employee Retirement Income Security Act (ERISA). This holding differs from earlier decisions in the Fourth and Fifth Circuits, which held that even if a denial of benefits letter failed to include the time limit for submitting a claim for judicial review, the time limit would be honored if the plan administrator’s communications substantially complied in the aggregate with the requirements of Section 503 of ERISA.
Facts of the Case
In 2005, Joseph Moyer applied for disability benefits under his employer’s ERISA-governed long-term disability plan. The administrator initially approved his application, but reversed its decision in 2007. In 2008, Moyer filed an appeal of this reversal, and the administrator affirmed its decision to revoke his benefits. The letter to Moyer affirming the revocation included a notice of his right to initiate judicial review under ERISA, but did not include a description of the plan’s contractual requirement that the review must be initiated within three years.
In 2012, Moyer initiated a legal claim, which the administrator moved to dismiss based on the plan’s three-year contractual time limit for claims. The district court agreed with the administrator and held that Moyer’s claim was time-barred on the theory that Moyer had constructive notice of the time limitation included in the plan document because, as a participant in the plan, he could have requested a copy of the plan document at any time.
Moyer appealed the district court’s decision, alleging that the administrator violated ERISA by not including the three-year contractual time limit in the 2008 denial of benefits letter and the plan’s summary plan description. The Sixth Circuit agreed with Moyer, noting that the contractual limitations in ERISA-governed plans will be upheld so long as such limitations are reasonable in duration (the court noted that a three-year period was reasonable), but that ERISA Section 503-1(g)(1)(iv) requires that denial of benefits letters must 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 502(a) of the Act following an adverse benefit determination on review.” Because the denial of benefits letter failed to include the contractual three-year time limit, the Sixth Circuit held that the letter did not fulfill these requirements and determined that Moyer’s claim was not time-barred. Because this ruling resolved the question at issue, the Sixth Circuit did not reach the issue of whether the three-year time limit needed to be included in the plan’s summary plan description.
The dissenting judge noted that both the Fourth and Fifth Circuits have used a substantial compliance test in determining whether a plan has complied with ERISA Section 503, including looking at multiple communications to determine whether the communications in the aggregate met the requirements. Additionally, the dissent argued that Moyer failed to raise his arguments, at the district court level, regarding the administrator’s failure to provide information on the contractual time limit, which prevented the administrator from responding to such an argument (including that the administrator had met the substantial compliance standard of the Fourth and Fifth Circuits).
The Sixth Circuit’s holding in Moyer makes clear that administrators of ERISA-governed plans with contractual time limits on when a participant must initiate judicial review of a denial of benefits should err on the side of caution and include a description of the time limits in denial of benefits correspondence and summary plan descriptions to preserve the protection of these limits.