In what can be viewed as a victory for plan sponsors, the Supreme Court ruled on Monday that statute of limitation periods written into plan documents are valid, as long as those periods are “reasonable.” The court, however, declined to define “reasonable.”

“The Supreme Court eliminated any uncertainty as to whether or not plan sponsors and/or employers can insert a contractual limitations period within the plan document itself,” says Nicole Eichberger, a New Orleans-based lawyer in Proskauer’s employee benefits, executive compensation & ERISA litigation practice. “And it did so by saying that contractual limitation periods written into plan documents are valid as long as they are reasonable, without opining as to what constitutes a reasonable period.”

The Court reaffirmed its prior position in cases such as Cigna Corp. v. Amara and Conkright v. Frommert that “parties cannot go outside of what the plan document says. In other words, the Court is going to continue to stick to its position that the parties are confined to the terms of the plan document,” Eichberger says.

Background

In October, the Supreme Court heard arguments in Heimeshoff v. Hartford Life & Accident Insurance Co., addressing the accrual of the statute of limitations for judicial review of an adverse benefit determination under an ERISA-governed plan.

Julie Heimeshoff filed her lawsuit against Hartford and Walmart in 2010, claiming they violated ERISA by failing to provide long-term disability benefits to which she was entitled under her employee benefit plan. Hartford denied Heimeshoff’s claim, originally filed in 2005, because of the failure to provide satisfactory proof of loss.

During the litigation, Hartford and Walmart moved to dismiss the complaint, arguing that it was time-barred under the terms of the plan. Heimeshoff, meanwhile, argued the plan was ambiguous as to when proof of loss was due and that Hartford had failed to advise her of the plan’s three-year limitation in its denial letter.

The District Court dismissed the case and the Second Circuit affirmed the dismissal. The Second Circuit’s three-judge panel rejected Heimeshoff’s argument that the contractual limitations period did not begin to run until Hartford’s final denial of benefits.

In accepting the case, the Supreme Court looked at only one question: When should a statute of limitations accrue for judicial review of an ERISA disability adverse benefit determination?

“The [Supreme] Court said that [three-year period] was reasonable, but what it declined to do was set a bright line rule that it had to be three years, or something less than three years,” says Eichberger. “It basically said this three-year period was reasonable and employers and plan sponsors are able to insert contractual statute of limitation periods within the plan document, as long as they are reasonable.”

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