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Supreme Court Upholds Internal Statute of Limitations in an ERISA Plan

In a unanimous decision (here), the Supreme Court has upheld the enforcement of an internal statute of limitations imposed by the language of an ERISA plan. 

Background. The case involved an employer-sponsored disability insurance plan. The plan language said that any lawsuit to seek payment of benefits must be filed within 3 years after proof of loss of the claim was required to be submitted. This was a shorter period than would have been required under general legal principles. Although ERISA does not provide a specific statute of limitations for claims for benefits, courts have long held that the most comparable statute of limitations under state law applies (usually 3 to 5 years) and that the statute of limitations does not begin to run until after the participant has exhausted the plan's internal claims and appeals process. Under the facts of the case before the Supreme Court, the effect of the internal statute of limitations imposed by the plan language was to require the participant to file a lawsuit within about 1 year after the conclusion of the internal claims and appeals process.

The Court's Ruling. The court held that it was permissible for the plan to impose a shorter limitations period than would otherwise apply under general legal principles. The court reasoned that the terms of the plan generally are controlling and must be given effect, unless the limitations period imposed by the plan is unreasonably short or another controlling statute prohibits the shorter limitations period. After considering the specific facts of the case, the court concluded that the limitations period imposed by the plan was not unreasonably short, and there was no other controlling statute that would require a different result. 

Comment. Internal limitations periods in ERISA-covered plans have become increasingly popular as a means of reducing the period during which a plan may be exposed to litigation over a claim for benefits, and the court's decision in this case is helpful affirmation that such plan terms may be enforced. But the conditions noted by the court - that an internal limitations period must not be unreasonably short and must not be prohibited by another controlling statute - leave some uncertainty going forward. In particular, the court's opinion provides no real guidance for determining whether an internal limitations period is unreasonably short, so plans imposing an internal limitations period will have to make a judgment about how short that period may be.


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Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
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