Employers Should Determine The Reasonableness Of Their Benefit Plans' Limitations Period Based On A Recent U.S. Supreme Court Ruling

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In Heimeshoff v. Hartford Life & Accident Insurance Co., the Supreme Court recently upheld a plan-imposed limitations period on a participant’s right to file suit for benefits so long as that period is not unreasonably short and not in conflict with other controlling laws (e.g., an applicable state law limitations period). In Heimeshoff, the plaintiff filed a claim for benefits under a long-term disability plan which required participants to bring suit within three years after the initial “proof of loss” was due. Because proof of loss is required before the internal review process is completed, the contractual limitations period generally will be shortened due to ERISA’s administrative exhaustion requirement.  In light of this shortened limitations period, the plaintiff argued that the plan’s limitations period violated the general rule that statutes of limitations begin when a claimant’s cause of action accrues. The Court disagreed and concluded that, absent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, as long as the period is reasonable. The Court also noted that the plaintiff was still left with about one year to file suit following the final benefit determination. The plaintiff did not dispute the reasonableness of a one year limitations period which begins after the completion of the internal review process. Finally, the Court warned that any bad faith delays by plan sponsors during the internal review process would likely trigger traditional defenses to statutes of limitations.  As a result of Heimeshoff, plan sponsors should review the reasonableness of their plan’s limitations period (if any) to determine whether it should be revised in light of this recent guidance.