United States: Fifth Circuit Decision Highlights Importance Of Compliance With ERISA Notice Requirements

The Fifth Circuit Court of Appeals recently vacated a Louisiana District Court's dismissal of a benefits claim, in a case that highlights the importance of strictly complying with ERISA's notice requirements when deciding benefits claims.

Facts of the Case

Mr. Hamann was a retired participant in the Building Trades United Pension Trust, a multiemployer defined benefit pension plan (the "Plan"). When he died, his wife was his surviving beneficiary. She applied for the post-retirement survival benefits due to her under the Plan, and her monthly annuity application was approved by the Plan on March 1, 2017. She then sought to convert her monthly benefit to a lump sum payment. The Plan's conversion form stated that the form must be completed and returned "by April 5, 2017 to receive the [lump sum] payment on May 1, 2017." The Plan received Mrs. Hamann's request on April 4, 2017, before the form's stated deadline, but Mrs. Hamann died before the scheduled May 1 payment was made.

Mrs. Hamann's estate administrator inquired about the May 1 lump sum payment, but the Plan responded in April 2017 that no benefits were owed to Ms. Hamann because she died before the benefit payment date. Approximately eight months later, the estate administrator sent a letter to the Plan demanding payment of the lump sum benefit. However, in March 2018, this demand was rejected because the demand was not made within 60 days of the April 2017 denial. The administrator did not appeal that determination, and instead filed suit.

District Court Ruling

The district court dismissed all five of the plaintiff's ERISA claims with prejudice, in part because the plaintiff had failed to exhaust her administrative remedies before filing suit. In general, a claimant must exhaust the administrative remedies laid out in the benefits plan before pursuing legal remedies. The Plan conceded that its April 2017 letter did not substantially comply with ERISA's notice requirements, but argued that its March 2018 letter did substantially comply with ERISA's notice requirements, curing its prior failure. The district court agreed, finding that the plaintiff was not excused from failing to appeal within 60 days of receiving the March 2018 letter.

Fifth Circuit Ruling

On appeal, the Fifth Circuit vacated the dismissal of the action with instructions to the district court to remand the claim to the Plan so that it could evaluate the merits of the plaintiff's pension claim. Although claimants seeking benefits from an ERISA plan are required to first exhaust administrative remedies before bringing suit, a claimant is excused from exhausting administrative remedies and is deemed to have exhausted them if a plan's administrator fails to establish or follow claims procedures consistent with ERISA's requirements.

The circuit court agreed that the Plan's April 2017 letter did not substantially comply with ERISA's notice requirements, but held that this failure should have excused the plaintiff from timely exercising her appeal rights. The timing requirements in ERISA are clear, and nothing in the ERISA regulations allows the Plan to cure its defective denial notice 242 days late. However, even if a cure period were applicable, fairness does not permit excusing the Plan's mistakes while simultaneously holding the plaintiff to "every jot and tittle" of the timing requirements.

The circuit court also held that the March 2018 letter failed to substantially comply with ERISA's notice requirements for several reasons. First, it did not describe the Plan's voluntary appeal procedures. It also actively discouraged plaintiff from seeking administrative review, stating that her request for review was untimely and that she could not seek judicial review; this created a reasonable ambiguity as to whether or not appeal rights were actually available. Finally, the letter was not provided within "5 days after the benefit determination," as required by ERISA. Therefore, the plaintiff should have been excused from exhausting her administrative remedies with respect to both of the Plan's letters.

If you need assistance in creating or modifying your plan's claims and appeals procedures to conform to the requirements of ERISA, or need advice regarding ERISA's statutory and regulatory requirements, please reach out to a member of the Kutak Rock Employee Benefits and Executive Compensation practice group.

Theriot v. Building Trades United Pension Trust Fund, 2021 WL 955152 (5th Cir. Mar. 12, 2021)

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