OK, hold onto your seats for some flat-out ERISA law excitement. This morning, the United States Supreme Court heard oral argument in Heimeshoff v. Hartford Life & Accidental Insurance Co. [Briefs at SCOTUSblog], concerning statute of limitation accrual issues for benefit claims under Section 502(a)(1)(B) of ERISA.

RossRunkel.com, as always, gets to the heart of the matter (which is really impressive when you consider it is ERISA after all):

Heimeshoff’s disability policy, administered by Hartford, says that a court suit for wrongful denial of benefits has to be filed within three years of when the claimant files a proof of loss with the plan administrator.

That can be tough, given the fact that it’s possible for the three-year period to begin to run before the claimant has gone through the administrative procedure that must be followed before bring a suit. I suppose it’s even possible in some cases that the three years would run out before the claimant got a final denial.

Hartford has a simple response, which is that ERISA plans usually get enforced the way they are written.

There’s really no statutory text that’s much help.

The petition for certiorari points out that lower court[s] have adopted three conflicting approaches to answer the question of accrual:

(1)   A plan’s statute of limitations cannot begin running until the claimant has exhausted administrative remedies and the plan has issued a formal, final adverse determination (Fourth and Ninth Circuits);

(2)   A plan’s pre-denial statute of limitations is enforceable if “reasonable,” as determined on a case-by-case basis (Second, Sixth, Seventh, Eighth, and Tenth Circuits); and

(3)   The plan must notify the claimant of the time limits for judicial review, in the SPD and adverse determinations, in compliance with ERISA regulations; and if it does not, the court will not allow the plan to assert the plan’s limitations defense or will equitably toll the limitations period (First Circuit and a District Court in Second Circuit).

I don’t see any clear path for the Court on this one.

Also see Argument preview: When can an ERISA limitations period start to run? at SCOTUSblog.

I agree with Ross that this area of ERISA law is a mess. The ERISA written plan requirement rule suggests that the plan administrator follow the terms of the plan as written, but to do so, at least conceivably in some cases, the administrator could drag their feet and wait for the statute of limitations to run before finally deciding the internal appeal and thereby prevent the employee from ever filing a benefits denial claim in court.

Equitable tolling might be one way of dealing with the potential unfairness of the rule, but its implementation would also be messy.  Also, it is unavailing to say with a straight face that plan administrators and employee should be bound by terms of the plan because if the employee wanted a different type of SOL they could just bargain for it.  Everyone knows that employees don’t bargain over plan language. They are classic adhesion contracts, presented on a take-it-or-leave-it basis.

To me, the best rule would be to start the SOL to run once the internal administrative process has been finalized and the employee is free to sue in court. This approach has the advantages of both providing a clear point when the SOL starts to run, plus provides incentive for the plan administrators to complete claims processing as quickly as possible.

No predictions on this one, folks, but I fear this pro-employer/pro-plan-sponsor court will adopt the written plan requirement rule and permit the plan sponsor to unilaterally set in the plan document an accrual date and a length for the statute of limitations which will further undermine employee rights under ERISA.

[Cross-posted at Workplace Prof Blog.]