Recent U.S. Supreme Court cases confirm the sanctity of the plan document, according to one industry attorney, and this evidence should motivate benefit advisers to ensure their clients plans are ironclad.
The Supreme Court in two 2013 cases addressing equitable relief (US Airways v. McCutchen) and contractual limitations (Heimeshoff v. Hartford Life and Accident Insurance) decided in favor of enforcing terms expressed in plan documents, a signal to employers that the plan document is king, says Neal Schelberg, a partner with Proskauer Rose LLP.
Say what you mean in your plan, Schelberg told attendees of the International Foundation of Employee Benefit Plans Legislative Update in Washington, D.C. Monday. The Supreme Court says if its in the plan it gets enforced. If its not, it will not.
In US Airways v. McCutchen, for instance, the nations highest court cited the plan document when it ruled in favor of US Airways after the employer sued an employee for $66,866 paid out in medical expenses on his behalf following a car accident. In addition to having his medical expenses paid by his US Airways health plan, the employee, McCutchen, recovered $110,000 as the result of a lawsuit he filed against the other party in the accident. The US Airways plan document provided that a participant must reimburse the plan for claims paid out of monies recovered from a third party, Schelberg said.
In a unanimous 9-0 decision, the Supreme Court enforced the plan terms as written, holding that equitable defenses such as unjust enrichment do not override a plans explicit terms.
This decision gives plans a greater confidence that courts will enforce plan terms as written and not re-write plan documents, Schelberg said.
He adds: Advisers can work with employers as they review the reimbursement/subrogation provision of their plan to ensure it meets the trustees intentions.
Likewise, employers should review plan documents to include contractual limitations provisions. Following another 2013 Supreme Court decision in Heimeshoff v. Hartford Life & Accident, plans have significantly greater control over and predictability concerning when a participants claim expires, Schelberg said.
In that case, the court ruled against a plan participant who sued Hartford in 2010 for a disability claim denied by the insurance company in 2005. The court enforced terms set out in a Hartford Life & Accident plan document that required participants to file suit to recover benefits within three years after the proof of loss is due.
Plans now have the green light to include contractual limitations provisions, at least regarding welfare benefits claims, at least regarding welfare benefits claims, Schelberg told attendees.
He added, A fair reading of the decision supports upholding contractual limitations periods in pension plans, as well.
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