When is a plan limitation period not a limitation period? Apparently when you don’t communicate it to participants, according to a recent court ruling.
In Mirza v. Insurance Administrator of America, Inc., the 3rd U.S. Circuit Court of Appeals held that a plan’s limitation period[1. What’s a “limitation period”? As the Retirement Plan Blog points out, in layman’s terms, it’s a law set forth in a state statute of limitations that sets time limits on how long a party has to file a civil lawsuit or how long the state has to prosecute someone for committing a crime. They are specific to each state and vary depending on the legal claim or crime involved.] did not actually bar a claim for benefits because ERISA regulations require that “the administrator must disclose the plan’s applicable time limits.”
Section 502(a) of ERISA authorizes a beneficiary to sue to recover benefits, but it does not contain a specific statute of limitations. Thus, according to an analysis by Verrill Dana LLP, courts have ruled that plan administrators must come up with their own (reasonable) deadlines for a review of those claims by a court. Absent that, courts will apply the statute of limitations governing the most similar state law claim.
In Mirza, the plan administrator denied a claim assigned to Dr. Neville Mirza by one of his patients. However, the denial did not include notification that he had one year to appeal the decision under the plan-imposed statute of limitations. When Dr. Mirza filed suit 19 months after the denial, the district court ruled in the plan’s favor, concluding that his claim was time-barred.
However, on appeal the 3rd Circuit reversed, holding that ERISA’s regulations require that any adverse benefit determination 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 section 502(a) of the Act following an adverse benefit determination.” Absent that notice, the court instead applied the state’s (i.e., New Jersey’s) 6-year statute of limitations, which allowed the claim to proceed.
It’s also worth noting that the 3rd Circuit pointed out that two other Circuits (the 1st and 6th) had previously required disclosure of plan-imposed time limits.
While calling these decisions a trend may be a stretch at this point, to be safe, plans imposing their own statute of limitations should add this information within adverse benefit determinations to avoid having to litigate this issue.
So if a plan you work with has a plan limitation period, make sure it’s communicated.
Footnote
