No good deed goes unpunished. Those of us working with 401(k) plans are familiar with this sentiment. An employee benefit plan, as the name implies, is supposed to benefit employees. Yet benefit plans – particularly 401(k) plans – can be sources of aggravation for many. In addition to the threat of lawsuits, employers must also grapple with the difficulty of crafting lengthy, complex plans using language that is legally precise yet understandable to the average plan administrator.
While ERISA litigation has proliferated in recent years, with the Supreme Court issuing four ERISA decisions in 2020 alone,1 the Court under the leadership of Chief Justice John Roberts has pointed plan sponsors toward a way to help control plan disputes. The Roberts Court's ERISA jurisprudence has re-awakened the idea that one of ERISA's key tenets is that a plan's written terms matter. In other words, if plan sponsors want to reduce their exposure to litigation, one way to do so is by adding certain plan terms that mitigate risk.
This column identifies some ways in which plan sponsors can amend plan language to manage and/or mitigate exposure to claims for benefits and other ERISA claims.
Add a Limitations Period for Lawsuits or Arbitration Requests
Benefit claims limitations period
Plan sponsors should consider including a provision limiting the time period during which a plan participant can bring a claim for benefits.2 Because ERISA does not provide a statute of limitations (except for fiduciary breach claims),3 federal courts generally apply the most analogous state-law limitations period.4 This borrowed limitations period principally applies to denial of benefit claims brought under 29 U.S.C. § 1132(a)(1)(B). This variance in state laws means that participants in the same plan may be subject to wildly varying limitations periods depending on where they bring their federal claim. In some instances, this means, for example, that a claim could be brought up to 10 years after the dispute giving rise to the lawsuit occurred. These differences across a plan population do not promote the certainty and uniformity that should be among the touchstones of prudent plan administration.5
However, there are steps a plan can take to promote a more uniform dispute resolution process. For example, a court will likely enforce a different limitations period that is contained in plan documents, as long as the contractual limitations period is not unreasonably short or otherwise foreclosed by a controlling statute. This was confirmed by the Supreme Court in its decision in Heimeshoff v. Hartford Life & Accident Insurance Co.6 There, the Court considered whether ERISA permits parties to choose a limitations period by contract.7 The Court concluded that because ERISA is silent regarding a statute of limitations, contractual limitations periods are permissible and courts must give effect to them unless they are unreasonably short.8
While endorsement of shorter limitation periods is a useful tool, it is important that plan administrators follow any applicable amendment procedures in adding such a provision. As the Supreme Court held in CIGNA Corp. v. Amara, 9 to be enforceable, requirements must be included in the governing plan document, as opposed to other plan materials such as a summary plan description or benefit communication.10
Nonetheless, while a limitations period must be included in the plan itself, as a best practice, plan sponsors should conspicuously include any plan-imposed limitations period in benefits determination letters, in addition to the summary plan description. And as discussed below, a clear record should be kept of participants' receipt of such plan communications.
1 See Rutledge v. Pharm. Care Mgmt. Ass'n, 141 S. Ct. 474 (2020); Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020); Intel Corp. Inv. Policy Comm. v. Sulyma, 140 S. Ct. 768 (2020); Ret. Plans Comm. of IBM v. Jander, 140 S. Ct. 592 (2020).
2 For example, "An individual must commence a lawsuit involving plan claims no later than two years after the individual first receives information that constitutes a clear repudiation of the rights the individual is seeking to assert."
3 See 29 U.S.C. § 1113.
4 See, e.g., Richardson-Roy v. Johnson, 657 F. App'x 113, 115-16 (3d Cir. 2016) (applying a one-year limitations period under Delaware law); Mirza v. Ins. Admin. of Am., Inc., 800 F.3d 129, 138 (3d Cir. 2015) (applying a six-year limitations period under New Jersey law); Pilger v. Sweeney, 725 F.3d 922, 926 (8th Cir. 2013) (applying a 10-year limitations period under Iowa law).
5 See Hartenbower v. Elec. Specialties Co. Health Benefit Plan, 977 F. Supp. 875, 883 (N.D. Ill. 1997) (recognizing that ERISA's policy promotes "uniformity, certainty and predictability for both plan beneficiaries and their trustees") (quotation marks and citation omitted).
6 Heimeshoff v. Hartford Life & Accident Insurance Co., 571 U.S. 99, 109 (2013).
7 Id. at 107.
8 Id. at 108-09.
9 CIGNA Corp. v. Amara, 563 U.S. 421, 437-38 (2011).
10 See Tetreault v. Reliance Std. Life Ins. Co., 769 F.3d 49, 55-56 (1st Cir. 2014) (explaining that under Amara, summary plan descriptions do not constitute the terms of a plan).
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Originally published in Employee Relations Law Journal - Vol. 47, No. 3, Winter 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.