On Monday, the Supreme Court unanimously ruled that a reasonable deadline for filing a lawsuit for benefits was enforceable. (Heimeshoff v. Hartford Life & Accident Insurance Co.) The decision is important because it confirms that the clock may start before a claim is filed under the plan’s mandatory administrative process. Plan sponsors who have not already done so should review the limitations periods under their plans and consider revising or stating more clearly when the limitations clock starts.
ERISA allows plan participants to sue for benefits, but participants generally must exhaust the plan’s internal claims procedures before going to court. Because ERISA does not contain a statute of limitations, many plans specify their own limitations period. That practice is not controversial, as long as the duration of the limitations period is reasonable.
Courts were divided, however, on the question whether plan language can control when the limitations period starts to run. In Heimeshoff, the plan said that the limitations period started when “proof of loss” was due. The participant, with support from the Department of Labor, argued that the clock should not start until after she had completed the plan’s internal claims procedures–which could extend for a year or more past when the proof of loss was due.
The Supreme Court unanimously disagreed with the participant and the Department of Labor, and upheld the terms of the plan. The Court noted that ERISA permits a plan-specific limitations period and reasoned that the period chosen can have no meaning unless the plan can specify a start date. The Court found no practical downside to the result, because the limitations period was long enough to give diligent participants ample time to bring a lawsuit. Julie Heimeshoff, for example, had more than a year to file suit after the plan finally denied her claim, but she failed to do so. The Court also noted that, in the rare case where a participant is unable with diligence to bring a lawsuit by the deadline, equitable doctrines might allow an extension. The Court declined to let those rare cases override the more general principle that the plan provisions control.
Although the case involved a long-term disability plan, we believe the principles of the decision also apply for retirement and other plans. We encourage plan sponsors to review their limitations periods and consider whether the time when the clock starts should be revised or stated more clearly. Careful drafting of these provisions is critical–we have seen some plan provisions that actually could allow the statute of limitations to start later than it otherwise would have started.