A Primer on the ERISA Claims Process - ABA YLD 101 Practice Series

By Christina Crockett

In typical litigation, an aggrieved party hires an attorney who sends a series of letters - each successive letter with increasing intensity and assertiveness. After months of exchanges, a lawsuit might arise alleging breach of contract, tortious interference, or a host of other theories. Demanded relief might include compensatory or make whole relief plus punitive damages.

By enacting the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), Congress shook up this common scheme and created a uniform administrative process that left out trial courts in the initial benefit determination process for benefit claims under covered pension and welfare benefit programs. With ERISA, Congress empowered plan fiduciaries to make final claim decisions and gave significant deference to their decisions since they, as opposed to trial judges, are most familiar with their respective benefit plans. Now, as a result, ERISA completely preempts claims under employee benefit plans and binds plan participants and administrators to its elaborate claims procedure.
The Claims Process
There are two basic fundamentals to ERISA's claims process: (a) adequate notice of benefit denials and (b) reasonable opportunity for full and fair review. Generally, after a participant files a claim for benefits, the plan administrator has 90 days to decide the claim. If the administrator denies the claim, the claimant has 60 days to appeal. Upon receipt of an appeal, the administrator has 60 days to approve the claim or uphold the previous denial. (Different time frames apply to disability and certain health claims, and administrators may extend the decision-making periods under certain circumstances.) The process of filing the claim and appealing denied claims exhausts administrative procedures and clears the way for claimants to proceed to court.

Ordinarily, claimants must exhaust all of the plan's administrative procedures before filing suit. There are limited exceptions, however, that include futility, inadequate remedies, denial of meaningful access to the plan's administrative review scheme, and certain statutory claims. If any of these exceptions arise, a court may allow a participant to bypass the plan's claims process and go directly to court.

The Administrative Record
One of the most important features in an ERISA case is the administrative record which is a compilation of all claim-related documents dating from the first claim for benefits to the date of the appeal decision. Documents in the record include, but are not limited to, written claims for benefits, medical and tax records, decision-maker notes, and other documents and communications regarding the claim. The administrative record is important because if the participant later files suit, the court generally will limit its review to the documents in the record. In other words, unlike traditional litigation which includes a discovery period, in most ERISA cases the court's review of the claim is limited to the administrative record. It is, therefore, imperative to ensure that all relevant documents, including documents subject to the fiduciary exception to the attorney-client privilege ( i.e., documents that qualify as privileged documents outside the ERISA context), are in the administrative record.

A Deferential Standard of Review          
Again, the linchpin to ERISA's claims procedure is the significant deference accorded to plan administrators. Recognizing this, the Supreme Court held, in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), that if a benefit plan document gives the administrator discretionary authority to determine benefit eligibility or construe the terms of the plan, courts must defer to that administrator's decision. (An exception exists for cases involving conflicts of interest.) This means that if the administrator based its decision on a reasonable review of the facts, in other words based its decision on a reasonable review of the administrative record, the court will likely uphold that decision.

Types of ERISA Claims and Relief
There are three types of ERISA claims: (1) claims for benefits; (2) claims for breach of fiduciary duty; and (3) claims for equitable relief for breach of plan or other statutory obligations. Aside from claims for benefits which either a state or federal court may entertain, a claimant must file the latter two claims in federal court. Regarding relief, successful claimants may receive past due benefits, a declaration of future rights to benefits, restitution, injunction, or other appropriate equitable relief depending on the type of claim. Punitive damages are not available in ERISA cases, but a court may award discretionary attorneys fees using the Lodestar approach which is based on reasonable hourly rates. The court, however, generally will not use this approach in a class action if a common fund is available.

There are primarily three federal agencies charged with promulgating regulations pursuant to ERISA - the Department of Labor, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation. For additional information regarding ERISA's claims procedure, new practitioners should consult the Labor Regulations, specifically 29 C.F.R. § 2560.503-1.


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About the Author

Christina Crockett is an associate in the McLean, Virginia office of Hunton & Williams LLP. She specializes in employee benefits law.

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