ERISA plan sponsors were given what was described in our earlier post as a “holiday gift” last December with respect to plan-based statutes of limitation when the Supreme Court decided Heimeshoff v. Hartford Life & Accident Insurance Co. There, the Court declared a three-year plan-based (or contractual) time limitation for the filing of an ERISA civil action based on a benefit claim denial to be reasonable. Recently, the Sixth Circuit returned to the subject of plan-based statutes of limitation in Moyer v. Metropolitan Life Insurance Co., decided in August.
In Moyer, a divided panel of the U.S. Court of Appeals for the Sixth Circuit declined to enforce the contractual time limitation expressed in the plan documents, holding that the plan’s administrators did not substantially comply with ERISA Section 503 when they failed to include the plan’s own limitations period for filing an action based on a claim denial in the plan’s denial letter to the participant. ERISA’s Section 503 claims procedures and its explanatory regulations provide that claim denial letters must 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.” 29 C.F.R. 2560.503-1(g)(iv). Some courts have interpreted this provision to simply require a statement instructing the participant or beneficiary of his/her general right to sue.
However, the Moyer majority did not adopt this view, finding that the inclusion of the time limitation within the plan document did not equate to constructive notice to the participant or beneficiary. Instead, the court held, “[t]he exclusion of the judicial review time limits from the adverse benefit determination letter was inconsistent with ensuring a fair opportunity for review and rendered the letter not in substantial compliance….” with the ERISA requirements. As a result, the Sixth Circuit found that the notice was insufficient to trigger the plan-based limitations period for filing the civil action.
The opinion itself was delivered along with a dissent, positing that majority oversimplified the issue and, in fact, relied upon inadequate briefing as the issue of sufficiency of notice under Section 503 was not central to the appeal. Further, many courts outside of the Sixth Circuit have found that the text of this regulation does not require claims letter disclosure of limitations periods for bringing civil actions. In addition, the dissent opined that the majority gave short shrift to considering whether the Section 503 “substantial compliance test” was satisfied, even if the limitations period was required to be stated. As a result, the Moyer decision does not necessarily suggest a changing of the tide on the issue, but does indicate that the Sixth Circuit takes seriously the need to communicate these provisions to participants in at least some manner other than simply including them in the plan document.
It is important to note here that the summary plan description for the plan at issue in Moyer did not include the plan-based limitations period for filing a civil action. Had the summary plan description disclosed this information (and presuming the summary was properly provided to the participant), the issue may not have progressed to the Sixth Circuit at all. Further, this particular limitations period began running when proof of claim was required, rather than upon adverse determination or upon final determination upon review. Had the statute of limitations run from the final determination upon review, the limitations would not have been pertinent yet at the time of the initial claim denial letter.
Even if the majority opinion in Moyer fails to apply in other fact scenarios or garner broad support across circuits, at the very least, the decision represents the current interpretation of the law within the Sixth Circuit. For plan administrators of benefits plans governed by the Sixth Circuit and beyond, we’d recommend the same course of action – in drafting future denial of claims letters, any plan-based limitations period should be added to the explanations regarding a participant’s right to bring suit, even if you already include this information in your summary plan descriptions. This is a belt and suspenders approach to compliance, but it is a simple step that could save much consternation and expense down the road. In short, add it to the to do list — the sooner, the better.