A Federal appellate court recently decided a case, which potentially could have a great impact on the prosecution of participant claims against administrator of plans under the Employee Retirement Income Security Act of 1974, as amended (ERISA). The case,Spinedex Physical Therapy USA, Inc. v. United Healthcare of Arizona, Inc., involved claims for health benefits, but some of the court’s holdings apply as well to pension benefit claims under ERISA.
The case involved claims brought by a medical provider on behalf of its patients against health plans and their administrators who denied the patients’ clams.
Some of the plans in the case contained limitations periods requiring that lawsuits for recovery of benefits be brought within two years of the time the claim arose. The court held the limitations periods were not enforceable because they were not disclosed in the required location within the summary plan description. The court interpreted ERISA regulations as requiring that the limitations period either be disclosed in close proximity to the description of benefits or that a reference to the limitations period be contained in the description of benefits.
The court also held that plan documents (which would include the plan itself and the summary) must affirmatively and unambiguously state that a participant has to exhaust administrative remedies before filing a lawsuit in order for that requirement to be enforced. If a reasonable reading of the documents would lead to the conclusion that exhaustion of administrative remedies is not required, it will not be required.
Finally, the court concluded that any party that acts as an administrator in processing claims may be an ERISA fiduciary and, therefore, may be sued for improperly denying benefits. It stated:
[P]roper defendants … for improper denial of benefits at least include ERISA plans, formally designated plan administrators, insurers or other entities responsible for payment of benefits, and de facto plan administrators that improperly deny or cause improper denial of benefits.
This conclusion is in line with prior case law holding that any person may be a ‘functional fiduciary” with respect to an ERISA plan by virtue of his or her actions even if the person is never formally appointed a fiduciary.
Plan sponsors and administrators should review their plan documents to ensure that contractual limitations periods are properly located in the summary plan description” and that plan documents clearly state that plan participants must exhaust all administrative remedies prior to filing a lawsuit against a plan for benefits. Moreover, the case reminds us that one does not needs to be appointed a plan fiduciary to be subject to fiduciary liability. Potential liability may follow one’s actions with respect to a plan.
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