ERISA requires that plans contain a reasonable claims procedure. Courts have generally required claimants to exhaust that claims procedure before filing a lawsuit. In addition, if the plan gives the plan administrator discretion to interpret the plan and decide claims, a court will often give deference to the plan administrator’s decision. These rules should encourage employers to include robust claims procedures in their plans.
ERISA itself does not have a statute of limitations for participant claims. A statute of limitations is a time period during which a claimant may bring a lawsuit and can range from one or two years to as many as ten years or longer depending upon the claim. Because ERISA does not have its own statute of limitations, courts borrow from the states’ statutes of limitations. For example, in Minnesota courts may look to the two year statute of limitation on wage claims and apply that statute to certain ERISA plan benefit claims.
In a recent decision regarding long term disability benefits, the court upheld a three year limitations period that was not imposed by state law, but instead contained in the employer’s plan. The limitations period was written into the plan document but not reiterated in the letter that the claimant received when the claim was denied. The court held that the contractual limitation in the benefit plan was enforceable because it was a reasonable time limit.
It seemed from the description in the case that the summary plan description did not detail the requirements for filing a claim for benefits although it did prescribe the procedure for the claimant to obtain plan documents. Because the plan document described the contractual limitation and because the summary plan description described how to get a copy of the plan document, the court said that the claimant was on constructive notice of the limitations period. Because the case was filed more than a year after that limitations period expired, the case was dismissed.
Under this decision, an employer would not be required to describe a contractual limitation in detail either in the summary plan description or in a claim denial letter. Despite the fact that the court gave the employer the benefit of the limitations period without requiring that it be in the summary plan description and claim denial letter, not all courts may be that forgiving. The better practice would be to include the contractual limitation in the plan document, the summary plan description, and any claim denial letters.