Generally, an individual seeking benefits under an ERISA plan must exhaust the administrative remedies as a prerequisite to filing a lawsuit. Typically, administrative remedies include submitting a timely appeal to the plan administrator, usually the employer, as described in the summary plan description and plan documents. The denial of benefits, or adverse determination, normally starts the clock for the filing of an appeal. A claimant who fails to timely file an appeal fails to exhaust his administrative remedies. Absent some extraordinary circumstances, failing to exhaust the administrative remedies provided for under an ERISA plan is normally the end of the road for the claimant.
If the claimant files a timely appeal, the matter might be resolved without a lawsuit. This administrative process often serves the interests of judicial economy (keeps a lawsuit from being filed), hence the strong policy in favor of the exhaustion requirement.
However, not all plaintiffs are simply seeking relief from a denial of their claim for benefits. An action for a violation of ERISA may not require that the plaintiff exhaust the plan’s administrate remedies. Recently, in Hitchcock v. Cumberland University 403(b) DC Plan, the Sixth Circuit Court of Appeals carved out an important distinction between violations of ERISA and benefit claims. In this case, the plaintiffs sought relief relating to a plan amendment that was alleged to violate ERISA. The Court held that, “the legality of the amendment is a question best suited for the courts to decide.” This decision marks a significant change in ERISA litigation in the Sixth Circuit. Now, only the Seventh and Eighth Circuits require plaintiffs to exhaust all administrative remedies as a prerequisite to filing a lawsuit in federal district court for alleged violations of ERISA.