Second Circuit Decision Emphasizes Importance Of Having Clear Administrative Exhaustion Language In ERISA Plans

Kirkendall v. Halliburton, Inc., No. 11-CV-2733 (2d Cir. Jan. 29, 2013): The plaintiff filed a putative class action under the Employee Retirement Income Security Act (ERISA) seeking, among other things, a redetermination of her benefits under the company’s pension plan should she decide to retire early. Halliburton argued that the plaintiff failed to exhaust her administrative remedies because she and her co-plaintiffs did not follow the process outlined in the “benefit claims” section of the plan documents, which outlined the procedure for filing a claim for benefits. The district court agreed and dismissed the plaintiff’s claim for failure to exhaust administrative remedies. The Second Circuit Court of Appeals reversed, and held that there was no clear procedure for the plaintiffs to follow in seeking a determination of future retirement benefits. The court explained that the plan documents “could be read to apply only when a plan participant is demanding benefits at the time when she is filing the claim” and did not discuss a participant’s inquiry as to the amount of future benefits. The Second Circuit thus adopted the Eleventh Circuit’s reasoning “exempting from the general exhaustion requirement those plan participants who ‘reasonably interpret’ their ERISA plan not to impose an exhaustion requirement” and explained that doing so “will have the salutary effect of encouraging employers and plan administrators to clarify their plan terms and, thereby, of leading more employees to pursue their benefits claims through their plan’s claims procedure in the first instance.” This decision reaffirms that companies must clearly draft the claims procedures in ERISA plan documents and ensure that the procedures are readily understood by a reasonable participant. Doing so will preserve the failure to exhaust administrative remedies defense, and will allow courts to apply the arbitrary and capricious standard that is generally utilized when reviewing an administrator’s denial of benefits, as opposed to the de novo standard of review, which will apply when a plan does not give an administrator authority or discretion to review and decide the specific benefits claim.

Note: This article was published in the February 2013 issue of the New York eAuthority.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.