In Heimeshoff v. Hartford Life & Accident Insurance Co., the U.S. Supreme Court unanimously upheld an ERISA long-term disability plan’s limitation that a participant be required to bring any suit for benefits no later than three years after proof of loss is due. The court’s decision confirms that an ERISA plan may establish a contractual limitations period for bringing an action under ERISA Section 502(a)(1)(B) to recover benefits due under the terms of the plan - even when the limitations period could potentially expire prior to the participant’s cause of action accruing because the participant has not exhausted his administrative remedies under the plan’s administrative review procedures - so long as the limitations period is not unreasonably short or otherwise contrary to ERISA.

ERISA does not specify a statute of limitations for bringing a claim for benefits under a plan pursuant to ERISA Section 502(a)(1)(B). In this vacuum, courts have generally applied the limitations period under the most analogous state law. Attempting to avoid the uncertainty that would follow from being subject to varying limitations periods under state law, some ERISA plans have adopted limitations periods of their own. Courts of appeals have reached opposite conclusions on the enforceability of plans’ contractual limitations periods.

Claims for benefits under an ERISA plan are subject to a two-tiered remedial scheme. In the first instance, a participant’s claim for benefits is reviewed by the plan’s administrator. If the administrator denies the participant’s claim, a participant may file an administrative appeal. Courts of appeals have generally held that participants must exhaust their administrative remedies prior to filing suit. Thus, a participant’s cause of action under ERISA does not accrue until the plan denies a participant’s administrative appeal. The second tier of ERISA’s remedial scheme involves judicial review of the decision reached at the administrative level. In most instances, the reviewing court will defer to the administrative determination unless the court finds that determination to be unreasonable.

Julie Heimeshoff was a senior public relations manager for Wal-Mart Stores. Heimeshoff stopped working after her physician diagnosed her with lupus and fibromyalgia. She then filed a claim for long-term disability benefits under Wal-Mart’s long-term disability plan. Hartford Life and Accident Insurance Company was the administrator for the long-term disability plan.

Heimeshoff filed suit to recover long-term disability benefits under the plan nearly three years after Hartford issued its final administrative denial of her claim (but more than three years after her proof of loss was due). Hartford and Wal-Mart moved to dismiss Heimeshoff’s suit as time-barred under the plan’s limitations period requiring any suit be commenced no later than three years after proof of loss is due. The district court granted the motion to dismiss, and the court of appeals affirmed the district court’s dismissal.

The Supreme Court held - and Heimeshoff did not seriously contend otherwise - that the three-year limitations period was not unreasonably short. The court noted that even when the administrative review process requires more time than usual, a participant would be left with one year to file suit. In most cases, moreover, a participant would have two years in which to bring suit following administrative review.

Heimeshoff’s central argument was that upholding the long-term disability plan’s limitations period was contrary to ERISA in that it threatened to undermine ERISA’s two-tier remedial scheme. To this end, the first main claim advanced by Heimeshoff was that participants would sacrifice the benefits of administrative review to preserve additional time for filing suit. The court quickly discarded this argument, noting that a court’s review is generally limited to the administrative record, and that the administrative decision would generally be upheld unless that determination was unreasonable.

The second main argument advanced by Heimeshoff for the limitations period undermining ERISA’s two-tier remedial scheme was that upholding the limitations period endangered judicial review of administrative determinations. Noting that the time limits prescribed by ERISA call for prompt administrative review of benefits claims, the court stated that those participants who find themselves barred from bringing suit due to a three-year limitations period likely failed to be diligent in pursuing their ERISA rights. And, in those circumstances where administrative review is deliberately prolonged to prevent a participant from timely bringing suit, the court stated that equitable doctrines such as waiver or estoppel could be invoked to prevent the plan’s limitations period from being used as a defense to the participant’s claim.

While the Heimeshoff case relates to a long-term disability plan, nothing in the court’s holding can be construed to limit its applicability to other ERISA plans. Going forward, ERISA plan sponsors may wish to create plan limitations periods in which to bring an action for benefits pursuant to ERISA Section 502(a)(1)(B). For this purpose, it is recommended that plan sponsors consult their ERISA attorney to determine the reasonableness of any limitations period being considered before amending any plans to include a limitations period.