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Court Finds Plan Language Does Not Require a Second Level Appeal

In this case, the summary plan description (“SPD”) described a participant’s ability to submit a second level appeal for a denied benefits claim under an employer-sponsored group health plan subject to ERISA and stated that failure to submit such an appeal would constitute a waiver of the participant’s right to review the decision. In addition, the denial letter received by the participant stated that she had a right to request a second level appeal. However, the court found neither the plan document, SPD, or denial letter obligated the participant to file a second level appeal before filing a lawsuit, thus resulting in the court’s denial of the defendant’s motion for summary judgment for failure to exhaust the plan’s administrative remedies. This case highlights the importance of reviewing plan and related documents to ensure they expressly state that submitting a second level appeal is required before a lawsuit over a denied… Continue Reading

Ninth Circuit Finds Summary of Material Modifications Violates ERISA for Failure to Reasonably Apprise Participant

A participant exceeded the lifetime maximum limit on benefits under a retiree health plan and then sued the employer and third party administrator for failure to adequately disclose the lifetime limit. The employer maintained an active employee health plan and a retiree health plan. However, the employer only used one summary plan description (“SPD”) for both plans. The SPD consisted of the 2006 SPD and a series of summaries of material modifications (“SMMs”) describing amendments to the plans since 2006. A 2010 SMM applied to the active employee plan and the retiree health plan. It stated that items marked with an asterisk did not apply to retirees. A heading labeled “Health Care Reform*” contained an asterisk, but the layout of the SMM did not make it clear which of the subsequently described changes, including the removal of the lifetime limit, fell under this Health Care Reform heading and thus did… Continue Reading

Fifth Circuit Holds Disability Benefit Offset Inappropriate Because of Ambiguous Language in Summary Plan Description

Verizon maintained a long-term disability plan (the “LTD Plan”) insured through MetLife, who had the discretionary authority to interpret the LTD Plan and to adjudicate claims. In 2007, an employee became eligible to receive benefits under both the LTD Plan and a Verizon pension plan due to disability, and the employee elected to take his full pension benefit as a lump sum and then roll it over into an IRA in a direct trustee-to-trustee transfer. The LTD Plan’s summary plan description (the “SPD”) contained language stating that a participant’s long-term disability benefits “may be reduced by other sources of disability income,” including “pension benefits from a Verizon pension plan, if the beneficiary elects to receive them.” MetLife offset the participant’s monthly disability benefit by the amount of the pension benefit he had rolled over into his IRA. The participant appealed countering that because he would not actually receive any of… Continue Reading

Fifth Circuit Confirms a Summary Plan Description May Also Act as the Plan Document under ERISA

The U.S. Court of Appeals for the Fifth Circuit reiterated its prior determination that a Summary Plan Description (“SPD”) for an employer-sponsored, group medical plan subject to ERISA could also serve as the plan document, provided it contains all of ERISA’s written plan document requirements. The court further held that in this case the SPD’s reference to a non-existent plan document was not material or detrimental to the participant under the plan. Historically, “plan booklets” for medical plans have contained the relevant SPD provisions regarding the benefits payable and the procedures for filing claims for benefits. However, many of those booklets did not contain all of ERISA’s requirements for an SPD or for the written plan document, including claims appeals procedures and certain other provisions, such as funding sources, amendment and termination provisions, and other required details. As a result, we have consistently recommended that the plan booklet be carefully… Continue Reading

Court Holds that Benefit Denial Letters Must Disclose Limitations Period for Judicial Review

The Third Circuit U.S. Court of Appeals, in Mirza v. Insurance Administrator of America, Inc., recently held that a notice of benefit denial under ERISA must include a statement of any time limits for filing a claim for judicial review in order for such limits to be enforceable under ERISA. The claimant exhausted the internal appeals process under the employer’s group health plan and received a final benefit denial letter from the claims administrator. Although the letter included a statement of the claimant’s right to bring a civil action under Section 502 of ERISA, the letter did not mention the plan’s one-year limitations period for filing a lawsuit. The federal district court dismissed the lawsuit as being time-barred because notice of the limitations period was contained in the plan’s summary plan description (“SPD”). In reversing, the Third Circuit held that regardless of whether the claimant had notice of the plan’s… Continue Reading

Breach of Fiduciary Duty by Employer for Issuing Inaccurate SPD

A participant sued both his employer and the insurance company with respect to a long-term disability (“LTD”) policy that had been purchased by the employer. The participant alleged an ERISA breach of fiduciary duty for the failure to increase LTD benefits in accordance with the terms of the summary plan description (“SPD”). The U.S. Court of Appeals for the Sixth Circuit ruled that the employer (1) functioned as an ERISA fiduciary when it prepared and distributed the SPD to participants, and (2) breached its fiduciary duty by furnishing the participant with a misleading SPD. In particular, the SPD provision describing the annual increase in benefits did not refer to the other sections of the SPD on which the employer and the insurer had relied to deny the benefits increase. Also, the insurer’s self-serving interpretation of the SPD to deny increased benefits was determined to constitute a breach of the insurer’s… Continue Reading

Court: Posting SPDs Solely on Company Intranet Insufficient under ERISA

A U.S. District Court recently held that posting an SPD on an employer’s intranet was insufficient to fulfill its obligation under ERISA to furnish SPDs to plan participants. The case involved a denied claim for life insurance benefits brought by a deceased plan participant’s beneficiaries. The participant had stopped paying life insurance premiums when she became disabled and stopped working. She also had not submitted proof of her disability to the insurance company, so she was ineligible for the policy’s premium waiver benefit that would have maintained her coverage during disability without additional premium payments. The beneficiaries argued, and the court agreed, that the participant did not have notice of the premium waiver’s requirements because she never received a current SPD. The evidence showed that the employer only made the SPD available to its employees via its internal intranet. Therefore, the participant could not have accessed the SPD after she… Continue Reading

Change in Interpretation Eliminating Unreduced Benefits for Terminated Vested Participants Violates ERISA’s Anti-Cutback Rule

An employer’s defined benefit plan provided unreduced early retirement benefits starting at age 60 for terminated vested participants and had been consistently so interpreted for a number of years. The employer later determined that early retirement benefits should be actuarially reduced, made a “clarifying” amendment to the plan, and thereafter either reduced or stopped making pension payments to allegedly “overpaid” participants whose benefits began before the changed interpretation and amendment. The U.S. Court of Appeals for the Third Circuit upheld a district court determination that the employer had violated ERISA’s anti-cutback rule and awarded the employees the withheld payments plus interest. In dismissing the employer’s arguments, the Third Circuit found that requiring claims exhaustion would have been futile and that the employer could not rely on favorable provisions in an SPD when the SPD clearly stated that in the event of any conflict with the plan, the plan terms would… Continue Reading

Court Holds that Benefit Denial Notices Must Include Time Limits for Judicial Review

In the case of Moyer v. Metropolitan Life Ins. Co., the U.S. Court of Appeals for the Sixth Circuit held that a notice of benefit denial under ERISA must include not only a statement of the claimant’s right to judicial review of the benefit denial, but also any associated time limits for filing a claim for judicial review. Moyer was a participant in an employer-sponsored long-term disability plan that was subject to ERISA (the “Plan”). MetLife was the designated claims fiduciary under the Plan. MetLife denied Moyer’s claim for benefits and his subsequent internal appeal of that denial. Nearly four years later, Moyer sued MetLife for the denied benefits under Section 502 of ERISA. The Plan document specified a three-year limitations period for filing such a lawsuit, but neither MetLife’s benefit denial notice to Moyer nor the Plan’s summary plan description (“SPD”) included any such limitations period. The district court… Continue Reading

Informal DOL Comment Suggests Delivery of SPDs via CD Not ERISA-Compliant

At a Q&A session between the U.S. Department of Labor (“DOL”) and the American Bar Association, the DOL was asked whether delivering summary plan descriptions (“SPDs”) by mailing them on a CD to employees who do not normally work on computers would satisfy ERISA’s regulations regarding the delivery method for SPDs. Generally, delivery methods must be reasonably calculated to ensure distribution and receipt of the SPD. The DOL responded to this question by opining that such a delivery method may not be reasonably calculated to ensure receipt because the plan administrator has not taken any measures to determine if participants have the necessary technology and ability to retrieve information from the CDs. However, the DOL’s response reflects only an unofficial, nonbinding staff view and thus does not necessarily represent an official position of the DOL.

December 2017
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