• Home
  • Executive Benefits
    • Supplemental Executive Retirement Plans – SERP
    • Split Dollar Loans
    • Deferral Plans
    • Welfare Plans
  • Revenue Strategies
    • Bank/Business Owned Life Insurance – BOLI
    • Corporate Owned Life Insurance – COLI
    • Insurance Company Owned Life Insurance
    • Managed Accounts
    • Guaranteed Income Contracts
    • Fee Income Strategies
  • Asset Protection
    • Estate Planning
    • Business Succession Planning
    • Key Person Planning
  • About
    • R. Scott Richardson, JD
    • Brenda R. Haag
    • Bruce F. Barge
    • Chris A. Richardson
    • Debra Hardimon
    • Fannie Mae Pantaleon
    • Jeff Prescher
    • Joe Tripalin
    • Patrick J. Costello
    • Philip Aderton >
      • 2019 CBAI IZALE Sponsored Golf Outing
  • Resources
    • Blog
    • Events >
      • History – Calendars by Year >
        • 2019 Client Conference
        • 2017 Client Conference
        • 2015 Client Conference
    • Privacy Policy & Website Privacy Statement
    • Video Education
  • Contact
  • Home
  • Executive Benefits
    • Supplemental Executive Retirement Plans – SERP
    • Split Dollar Loans
    • Deferral Plans
    • Welfare Plans
  • Revenue Strategies
    • Bank/Business Owned Life Insurance – BOLI
    • Corporate Owned Life Insurance – COLI
    • Insurance Company Owned Life Insurance
    • Managed Accounts
    • Guaranteed Income Contracts
    • Fee Income Strategies
  • Asset Protection
    • Estate Planning
    • Business Succession Planning
    • Key Person Planning
  • About
    • R. Scott Richardson, JD
    • Brenda R. Haag
    • Bruce F. Barge
    • Chris A. Richardson
    • Debra Hardimon
    • Fannie Mae Pantaleon
    • Jeff Prescher
    • Joe Tripalin
    • Patrick J. Costello
    • Philip Aderton >
      • 2019 CBAI IZALE Sponsored Golf Outing
  • Resources
    • Blog
    • Events >
      • History – Calendars by Year >
        • 2019 Client Conference
        • 2017 Client Conference
        • 2015 Client Conference
    • Privacy Policy & Website Privacy Statement
    • Video Education
  • Contact
IZALE Financial Group

Blog

United States Supreme Court Decides that a Period of Limitation for Filing Suit on Benefit Claims May Be Set Forth in the Applicable Plan Document

2/4/2014

0 Comments

 
MARKET TREND:  Increasingly, for the purpose of potentially limiting their exposure, sponsors of benefit plans subject to ERISA have been incorporating into the governing plan documents periods of limitations within which a participant or beneficiary must bring suit to enforce a claim for benefits.

SYNOPSIS:  In Heimeshoff v. Hartford Life & Accident Insurance Co., the U.S. Supreme Court resolved a split among circuits and upheld a plan provision requiring a suit to recover benefits to be brought within three years from the date that written “proof of loss” was required to be furnished.  The Court reasoned that the provision at issue was valid because (1) it did not contradict any applicable statute (i.e., ERISA), (2) the plan was required to be administered in accordance with its terms, and (3) the period during which the suit was required to be brought was not unreasonably short.

TAKE AWAYS:  Consultants to employers maintaining any type of ERISA-covered benefit plan – including retirement plans, death benefit plans, disability plans and others – should help ensure that the relevant plan documents contain provisions setting forth appropriately limited periods during which a lawsuit must be brought to enforce a benefits claim.  This approach will help limit the company’s exposure to open-ended claims.

MAJOR REFERENCES:  Heimeshoff v. Hartford Life & Accident Insurance Co., 571 U.S. ____, (2013).

Click here to download a printable pdf.
Last month, the U.S. Supreme Court issued a unanimous opinion in Heimeshoff v. Hartford Life & Accident Insurance Co., 571 U.S. ___, (2013) in which it resolved a split among circuit courts concerning the enforceability of provisions in written plan documents governing ERISA-covered benefit plans that establish a maximum period during which a claim for benefits may be filed in court.  In this decision, the Supreme Court upheld the plan provision, even though the period of limitations began to run before the individual was permitted under ERISA to file a lawsuit.

BACKGROUND

Section 503 of ERISA requires each plan within its purview to establish a procedure for bringing claims for benefits against the plan.  The procedure must afford two levels of review: (1) an initial determination concerning the claim for benefits and (2) an appeal of a claim denial.  These reviews are generally performed by the plan administrator or its delegate (such as an insurance company or a third-party administrator).  If a participant or beneficiary disagrees with the decision on appeal, he or she may bring suit under ERISA § 502.  Courts of appeals, however, have uniformly required that the claimant exhaust the internal review process before filing a claim in court.  Thus, in Heimeshoff, the Supreme Court noted that “a participant’s cause of action under ERISA does not accrue until the plan issues a final denial.”

ERISA does not itself specify a statute of limitations for filing a benefit claim in court.  As a result, some courts have looked to analogous state law for determining the period of limitations.  Also, some plan sponsors have established in their plan documents a maximum period during which a lawsuit must be brought.

THE HEIMESHOFF DECISION

Facts and Lower Court Rulings

The Heimeshoff case involved a claim for benefits under an employer’s long-term disability plan. The claim was first filed in August 2005.  The insurance company administering the plan denied the claim in November 2005 because of the claimant’s failure to provide additional information requested by the insurance company that it deemed necessary to determine whether she was disabled.   The claimant appealed that denial, with the insurance company issuing a final denial of the claim in November 2007.

In November 2010, almost three years to the date after the final denial of the claim for benefits, the claimant brought suit for benefits under the plan.  The plan, however, contained a provision that stated that “[l]egal action cannot be taken against [the insurance company]… [more than] 3 years after the time written proof of loss is required to be furnished according to the terms of the policy.”  The policy provides that “[w]ritten proof of loss must be sent to [the insurer] within 90 days after the start of the period for which [the insurer] owes payment.”  Thus, the claimant clearly failed to bring suit within the three-year period of limitations established in the plan.

The District Court granted the employer’s and the insurer’s motion to dismiss the claimant’s lawsuit on the ground that the suit was not brought within the period of limitations established under the plan, which it found to be consistent with applicable state law that permitted the plan to specify a limitations period that expired “[not] less than one year from the time when the loss insured against occurred.”  The Second Circuit affirmed the District Court’s dismissal of the case, and the Supreme Court agreed to hear the case to resolve the existing split among circuits concerning the enforceability of periods of limitations set forth in plan documents.

The Supreme Court’s Decision

The Supreme Court noted that statutes of limitations frequently do not begin to run until the plaintiff’s right to sue in court accrued, whereas the one in the Heimeshoff case began to run before the claimant would have been allowed to bring a legal suit (i.e., before the expiration of the plan’s internal claim adjudication process).  Nevertheless, the Court did not find that fact to carry a great deal of weight.  Instead, the Court noted that “the critical aspect of this case” was that “the parties have agreed by contract to commence the limitations period at a particular time.”  In this regard, the Court pointed to its “well-established framework” for resolving issues of this nature.  Specifically, the Court had previously stated that:

“In the absence of a controlling statute to the contrary, a provision in a contract may validly limit, between the parties, the time for bringing action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period.”  Order of United Commercial Travelers of America v. Wolfe, 331 U.S. 586, 608 (1947).

The Court also found that it was particularly appropriate to enforce a period of limitations that meets this standard and that is established in the governing documents of a plan subject to ERISA.  The Court cited language in ERISA itself, as well as in cases applying ERISA principles, to the effect that the written plan document is central to ERISA and that plans must generally be administered in accordance with the terms of their written documents to the extent consistent with ERISA.

Finally, the Court concluded that the period of limitations set forth in the plan document at issue in the Heimeshoff case was not unreasonably short.  It noted that, in general, the time frame established under ERISA for the internal review process generally contemplates that the process will be resolved in about one year, in which case a period of limitation of three years from when proof of loss was due would leave about two years for a participant or beneficiary to file suit after exhausting the internal administrative review process.  Even where the internal review process lasted longer than is typical, as in the Heimeshoff case, the claimant still had one year in which to bring suit.  In this regard, the Court noted that “ERISA regulations structure internal review to proceed in an expeditious manner.  It stands to reason that the cases in which internal review leaves participants [subject to a three-year period of limitations beginning when proof of loss is due] with less than one year to file suit are rare.”  Thus, the Court found this period not to be unreasonably short.

TAKE-AWAYS

Although there has been a growing trend to include a specific period of limitations in documents governing ERISA-covered plans – including retirement plans, death benefit plans, disability plans and others – many plans do not contain these types of provisions.  Consultants to employers maintaining these plans, and third-party administrators of these plans, should help ensure that the relevant plan documents contain provisions setting forth appropriately limited periods during which suit must be brought to enforce a claim for benefits.  Using this approach, employers may be able to limit their exposure to open-ended claims.  


DISCLAIMER 

In order to comply with requirements imposed by the IRS which may apply to the Washington Report as distributed or as re-circulated by our members, please be advised of the following: 

THE ABOVE ADVICE WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY YOU FOR THE PURPOSES OF AVOIDING ANY PENALTY THAT MAY BE IMPOSED BY THE INTERNAL REVENUE SERVICE. 

In the event that this Washington Report is also considered to be a “marketed opinion” within the meaning of the IRS guidance, then, as required by the IRS, please be further advised of the following: 

THE ABOVE ADVICE WAS NOT WRITTEN TO SUPPORT THE PROMOTIONS OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THE WRITTEN ADVICE, AND, BASED ON THE PARTICULAR CIRCUMSTANCES, YOU SHOULD SEEK ADVICE FROM AN INDEPENDENT TAX ADVISOR.


0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    IZALE Financial Group

    As an independent firm, we’re driven by close client relationships. For you, that means that our technical expertise is yours to rely on. 

    RSS Feed

    View my profile on LinkedIn

    Archives

    January 2021
    November 2020
    August 2020
    July 2020
    May 2020
    March 2020
    February 2020
    January 2020
    October 2019
    August 2019
    April 2019
    September 2018
    August 2018
    May 2018
    April 2018
    March 2018
    November 2017
    September 2017
    August 2017
    April 2017
    March 2017
    January 2017
    December 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    March 2015
    August 2014
    July 2014
    June 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013


    Categories

    All
    1035 Tax Deferred Exchange
    2018
    401K
    457f Plans
    AALU
    A. M. Ratings
    Articles
    Asset Man
    Asset Management
    Asset Protection
    BalancedComp
    Bank
    Banking
    Bank Owned Life Insurance
    Bankruptcy
    Banks
    Basel III
    Bear Market
    Beneficiary
    Benefit Plans
    Benefits
    Board Of Directors
    BOL
    BOLI
    Brian Smedley
    Bruce Barge
    Buisness Owned Life Insurance
    Business Owned Life Insurance
    Butterfly Effect
    Capital Conservation Buffer
    Capital Management
    Capital Requirements
    Cap Rates
    CBAI
    CDC
    CDI
    Center For Disease Control
    CEO
    CFO
    Chris
    Chris Richardson
    Clawback
    COI
    Cole Frago
    COLI
    Common Equity
    Commuity Bank Of Trenton
    Community Banking
    Community Banks
    Compensation
    Compliance
    Connecticut Court
    Consumer Protection Act
    Consumer Protection Act Of 2010
    Coronavirus
    Corporate Owned Life Insurance
    Corporate Taxation
    CPA
    Credit Rates
    Credit Union
    Credit Union Magazine
    Credit Union National Association
    Credit Unions
    CUES
    CUNA
    Daniel Kahneman
    DBO
    DCUC
    DCUC Alert Magazine
    Death Benefits
    Defense Credit Union Council
    Divorce
    Dodd Frank Wall Street Reform
    Dodd-Frank Wall Street Reform
    Econocheck
    Economic Forecast
    Employee Benefits
    ERISA
    Estate Planning
    Estate Tax
    Estate Trust
    Executive Benefits
    Executive Compensation
    Executive Retirement Plans
    Family Legacy
    FDIC
    Federal Reserve Bank
    Fee-based Checking
    Fee Checking
    Fee Income Strategies
    FICA
    Finance Industry
    Financial Education
    Financial Executives
    Financial Forecast
    Financial Managers Society
    Financial Planning
    Finanical Reporting
    Fintect
    Fiscal Year 2015
    Fixed Income
    FL
    FMS
    Fmstv
    FRS
    GAMA
    Gary Wilberg
    Gerald H. Sherman
    Gift Tax
    Global Markets
    Greenberg Traurig
    Greene V. Commissioner
    Guggenheim Partners
    House Ways And Means
    IDProtect
    Incentive Based Compensation
    Incentive-based Compensation
    Income Tax
    Indexed BOLI
    Indexed Universal Life
    Inherit
    Inheritance
    In-Laws
    Insurance
    Insurance Premium
    Insurance Tax Liability
    Interest Rates
    Investment Portfolio
    Investments
    IRA
    IRC
    Irrevocable Trust
    IRS
    IUL
    IZALE
    IZALE Financial Group
    IZALE Testimonial
    JB Barnes
    Jim Patterson
    Jobs Act 2017
    Joe Tripalin
    Jonathan Barnes
    Jonathan M. Forster
    Ken Kies
    Key Person Life Policy
    Las Vegas
    Leadership
    Legacy Planning
    Life Insurance
    Life Policy
    Liquidity Risks
    LLP
    Long Term Disability
    Martin Kalb
    Matt Bush
    May Disability Month
    Media
    National Credit Union Administration
    NCUA
    Non-interest Income
    Non-profit
    Nonqualified Deferred Compensation
    Nonqualified Plans
    NQDC
    Obama Administration
    Orlando
    Pay Ratio Rule
    Phil
    Phil Aderton
    Philip Aderton
    Ponzi Market
    Premarital Planning
    President Obama
    President's Budget
    Press
    Press Releases
    Profit Sharing
    PRS
    Rebecca Manicone
    Recession
    Regulationry Issues
    Regulatory Capital Calculation
    Regulatory Environments
    Resources
    Retirement
    Retirement Plan
    Revenue Strategies
    Richard A. Sirus
    Risk Management
    Roth
    R. Scott Richardson
    SBLI Term Life Insurance
    Scott MInard
    Scott Minerd
    Scott Richardson
    SEC
    Secure Checking
    SERP
    Sherman & Patterson
    Small Business Resale
    Social Security Tax
    Split Dollar Loans
    Split Dollar Plans
    Steve Brown
    Steve Fichtenbaum
    Steven B. Lapidus
    Stock Exchange
    Stock Market
    Stuart Lewis
    Tax Benefit
    Tax Code
    Tax Court
    Tax Cuts
    Tax Cuts And Jobs Act Of 2017
    Tax Deductions
    Tax Deferred Assets
    Tax Implications
    Tax Incentives
    Tax Law
    Tax Liabilities
    Tax Planning
    Tax Refor
    Tax Reform
    Taylor Advisors
    TCJA 2017
    The Forum
    Todd Taylor
    Top Hat Plans
    Treasury Bonds
    Trust
    Trustee
    Trusts
    US Supreme Court
    Washington Report
    Webinars
    Webinar W.O.W.S.
    Whole Life Insurance
    World Economic Forum
    World Economy
    WRMarketplace
    WRNewswire

Client Log-In

Log in to Pangburn
Log in to RBOLI.com

Contact

 855-492-5334 | Contact
Join Our Mailing List
© 2011 - 2019 IZALE Financial Group. All rights reserved. Login.
​Effective June 9, 2017, all individuals who provide advice to retirement plans, including Individual Retirement Accounts (IRAs), must abide by the fiduciary standard.  What does the fiduciary standard mean?  This means that your advisor must put your interests first before their own or that of the firm, make prudent recommendations, charge reasonable compensation and make no misrepresentations to you regarding recommended investments.  The recommendations made by your advisor must be based upon your specific investment needs and objectives.  The fiduciary standard is applicable to any recommendations that your advisor makes to you, the client, for your retirement account.
IZALE Website Privacy Policy
Please note the firm does have policies and procedures in place to monitor this level of fiduciary responsibility for our clients.
IZALE Financial Group does insurance business in California as IZALE LLC Insurance Agency
This site is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every advisor listed. For additional information, please contact Scott Richardson at 855-492-5334 .