Blog

Contact Us for More Information

The Importance of Time and Following Established Procedures in Providing Claim Decisions

Posted by Corey F. Schechter | Jun 21, 2017 | 0 Comments

Time

The Employee Retirement Income Security Act of 1974 (ERISA) establishes the minimum standards for most voluntary private pension and health plans. Among ERISA's many requirements, plan providers and fiduciaries must provide procedures for deciding claims and appealing decisions. Once all appeals are exhausted, the claimant may be able to seek relief in court.

Plan fiduciaries are generally given broad deference in their claim decisions. The court will not review the claim unless the denial was arbitrary and capricious, a highly deferential standard of review. However, in cases where the plan fiduciary did not follow the plan procedures or failed to provide a timely response, the court may choose to review the claim “de novo,” and may end up reversing the plan provider's decision.

In the recent Ninth Circuit ERISA case of Smith v. Reliance Standard Life Insurance Company, the Court of Appeals vacated the district court's order which denied claimant Gregory Smith's claim for short-term disability benefits. The Court found a procedural violation in denying the claim could be used as a factor in determining whether a plan administrator abused its discretion.

“On remand, the district court should determine whether the procedural violation caused Smith substantive harm such that de novo review of Reliance's benefits determination is appropriate.” If the district court finds substantial harm, they could review the claim de novo. If there was no substantive harm to Smith, the court could apply the more deferential “abuse of discretion” standard.

In a 2016 Second Circuit ERISA case, Halo v. Yale Health Plan, the court found in favor of the claimant. The court found that when a plan fiduciary did not provide a timely decision on a claim, the fiduciary should not benefit from the delay with a deferential review. Unless the plan fiduciary could show the failure to follow procedures was “inadvertent” and “harmless,” the court could review the claim de novo.

In addition, the court in Halo found that the plan's failure to provide a timely decision could provide “good cause” for the claimant to introduce new evidence. A court with a de novo standard of review, considering newly introduced evidence may come to a very different conclusion that the plan fiduciary in reviewing a claim.

Another Second Circuit ERISA case, Salisbury v. Prudential Insurance, applied the de novo review standard because of the plan provider's delay in providing a decision on the claimant's health benefits claim. Specifically, the provider took longer than 45 days to render a decision. Even though Prudential claimed an extension, they provided “inadequate grounds for seeking an extension.”

Citing Halo, the court wrote, “if the plan administrator does not strictly comply with the Department of Labor's regulations governing the processing of an employee's claim, then de novo review applies to the denial of benefits, regardless of whether the plan vests discretion in the administrator.”

If you have any questions about your ERISA claims procedures, Butterfield Schechter LLP is here to help. We will identify potential problems before they arise or represent your interests in ERISA litigation. Contact our office today with any questions you have on how we can help you and your business succeed.

About the Author

Corey F. Schechter

Corey Schechter practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Employment and Labor Law.

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Retirement Plans

We help establish a customized plan that meets regulatory requirements as a tax qualified plan. Following implementation, our attorneys can assist clients and their plan administrator with regular reviews and updates to help with regulatory compliance for the plan's operation, and continued effectiveness in meeting the client's specific goals.

ESOPs

We are dedicated to employee ownership. When you come to us for ESOP services, you receive influential legal counsel who stand beside you to help you stay informed, in compliance, and abreast of the latest developments-all to help you realize your plan goals as fully and effectively as possible.

QDROs

A QDRO is a specially designed court order that is required for the division of retirement benefits in a family law case. Many family law attorneys do not possess the expertise necessary to divide retirement benefits or stock options upon divorce. We have extensive experience in dividing qualified plans, government plans, IRAs and stock options between the employee spouse and non-employee spouse.

Butterfield Schechter LLP provides the information in this website as a service to its clients and visitors to the site. This website is for information purposes only and is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The information in this website is provided "as is," and while the information in this website is updated periodically, additional facts or future developments may affect subjects contained herein, and no guarantee is given that the information provided is correct, complete, or up-to-date. Seek the advice of professional counsel before acting or relying upon any article, form, or information in this web site. To ensure compliance with the requirements imposed by the United States Treasury and the Internal Revenue Service, we inform you that any federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of: (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing, or recommending to another person any transaction or matter addressed herein. Butterfield Schechter LLP has endeavored to comply with all known legal and ethical requirements in compiling this website. In the event that this communication does not conform with any laws or regulations of any state or country in which it may be received, Butterfield Schechter LLP will not accept legal representation based on this communication from a person in such a state or country. Electronic mail is provided as a convenience in communicating with the attorneys at Butterfield Schechter LLP. Contact by e-mail does not alone create an attorney-client relationship. Please remember Internet e-mail is not secure and messages sent to the firm or any of its employees or attorneys should not contain sensitive or confidential information. Thank you for visiting our site.

Menu