In Starnes v. Universal Fidelity Administrators Co., the US District Court for the District of South Carolina held that an ERISA plan's one-year contractual limitations period for filing suit under the plan was unenforceable against a participant because the plan's benefit denial letter failed to disclose the limitations period (No. 6:17-3073 (D.S.C. Feb. 5, 2018)). The denial letter also neglected to include other information required under the DOL claims regulations' content rules for claims notices (see Practice Note, Claims Procedure Requirements for Group Health Plans).

The health plan participant in this case filed a claim for benefits under the plan, which the plan's claims administrator denied. The participant appealed and the claims administrator denied the claim on appeal in a final denial letter issued November 11, 2014. Just over three years later—on November 13, 2017—the participant sued the plan for benefits under ERISA (ERISA § 502(a) (29 U.S.C. § 1132(a)); see also Practice Note, ERISA Litigation: Causes of Action Under ERISA Section 502). The plan moved to dismiss, arguing that the participant's claim was time-barred by the plan's contractual one-year limitations period. The participant asserted that the plan's limitations period could not be enforced because it was not stated in the denial letter.

As background, ERISA does not provide a specific federal statute of limitations for benefit plans, and the period in which an ERISA claim must be filed depends on the applicable state-law statute of limitations and any contractual limitations period, if reasonable. (For more information, see Practice Note, ERISA Litigation: Statutes of Limitation, ERISA Litigation: Chart of Most Analogous Statutes of Limitation Under State Law, ERISA Litigation Toolkit, and Legal Update, Supreme Court Upholds Limitations Period in ERISA Disability Plan.)

The participant also argued that the denial letter failed to include other information required by the DOL claims regulations, including:

(29 C.F.R. § 2560.503-1(g)(1)(iv), (j)(3), (j)(4)(i), and (j)(5)(iii).)

The district court concluded that the plan's contractual one-year time limit was unenforceable (see Practice Note, ERISA Litigation: Statutes of Limitation: Claim Denial Letters Should Include the Plan's Deadline for Filing Suit).

The court observed that although the Fourth Circuit has not decided this question, the First, Third, and Sixth Circuits have concluded that a benefit denial must state a plan-imposed time limit for filing suit in order for the limit to be enforced against a participant (see respectively Legal Updates, Claim Denial Letters Must Include Plan's Deadline for Filing Suit: First Circuit, Claim Denial Letters Must Provide Notice of Plan Limits for Suing under ERISA: Third Circuit, and Circuit Courts Disagree on Whether Claim Denial Letters Must Provide Notice of Limitations Periods). The district court acknowledged that other courts—including the Ninth and Eleventh Circuits—have enforced plan contractual time limitations in cases in which the plan did not inform the participant of the limitation. However, the district court characterized these decisions as unpersuasive and declined to follow them.

The case law on this issue generally involves interpretation of a requirement under the DOL regulations that benefit denial letters describe "the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under [ERISA Section 502(a)] following an adverse benefit determination on review" (29 C.F.R. § 2560.503-1(g)(1)(iv)). The district court concluded that this provision, read together with another claims regulation setting out content requirements for benefit denial letters on appeal (including voluntary procedures and bringing suit under ERISA) required disclosure of contractual limitations periods in final denial letters (29 C.F.R. § 2560.503-1(j)(4)(i)).

The district court noted that even if the plan was not required to inform the participant of the limitations period, the denial letter nonetheless failed to inform the participant of the right to bring suit under ERISA Section 502(a) and other denial letter content requirements for denial specified in the DOL claims regulations.

The court also held that the failure to inform a participant of the right to file suit under ERISA Section 502(a) is per se prejudicial to the participant. As a result, the court denied the claims administrator's motion for judgment on the pleadings.

As this district court notes, there is some disagreement in the circuit courts of appeals on whether a plan-imposed contractual limitations period is enforceable if it is not disclosed in benefit denial letters. According to the district court's research, the Fourth Circuit has not yet weighed in on this question – though several other circuit courts already have. However, to avoid costly litigation on this question and having a court conclude that a plan's limitation period is unenforceable (as in this case), it may be easier for the plan to simply inform participants in benefit denial letters of any plan-imposed limitations periods.

Notably, the DOL's enhanced claims procedure regulations for disability benefit claims require – for claims filed after April 1, 2018—a description of any contractual limitations period relevant to the claimant's right to bring the action, including the calendar date on which the contractual limitations period expires for the claim (see Practice Note, Claims Procedure Requirements for Disability Claims).