This week we discuss the importance of establishing good claims procedures and the benefits of following those procedures.

A plan’s claims procedures should be spelled out clearly in both the plan document and the summary plan description (where the two documents are not one in the same).  In addition to setting all of the applicable deadlines for submitting claims and appeals (as we discussed last week), the procedures should inform claimants of:  optional levels of appeal or review (if any); procedures for designating an authorized representative; the requirement to exhaust the plan’s claims procedures before commencing an action; and their right to review documents relevant to the claim decision.  Good claims procedures also will confer final, decision-making authority on one or more people, or a committee.  Importantly, the claims procedures must be made known to all participants because, of course, without knowledge of what the claims procedures are, a participant cannot reasonably be expected to utilize them.

The claims process, contrary to what may be intuitive to many, is not generally viewed by the courts to be an adversarial process—at least not at the beginning stages.  That is because plan fiduciaries—such as those responsible for deciding claims and appeals—owe a fiduciary duty of loyalty to participants.  Now, that is certainly not to say that claims decisions must always be in the participant’s favor.  It does mean, however, that participants must be given an opportunity to present their position on why they believe they are entitled to benefits and that the plan fiduciary should consider and evaluate all of their arguments at the claim and appeal stages.  The fiduciary should give careful consideration to the evaluation of a participant’s claims and arguments, particularly since the participant is generally entitled to all documents that are considered by the claims fiduciary in making its decision—even if the documents are not relied upon in reaching the decision.

There are many benefits to making sure the claims fiduciary follows the plan’s claims procedures.  For instance, a court (or arbitrator) will require a claimant to first exhaust the plan’s administrative process before s/he brings an action for benefits under ERISA section 502(a).  And, if after exhausting the claims procedures, the participant pursues a claim for benefits in court (or arbitration), the judge (or arbitrator) is required to defer to the claims fiduciary’s decision unless it was arbitrary and capricious.  Unlike giving the claim a fresh review, the arbitrary and capricious standard of review is highly deferential to the plan fiduciary’s decision.  Furthermore, the participant generally will not be entitled to discovery in litigation (or arbitration) outside of the administrative record.  This has the added benefit of reducing litigation (or arbitration) costs.

Next week, we’ll discuss the mechanics of benefit claim administration, including dealing with the fiduciary exception to attorney-client privilege.

You can find our previously published best practices here:

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Photo of Russell Hirschhorn Russell Hirschhorn

“Russell has strong subject matter expertise.”

“Russ is extremely responsive and practical. He listens to the client perspective and is hands on and engaged, while also delegating work as appropriate.” 

-Chambers USA

Russell L. Hirschhorn is co-head of Proskauer’s premier ERISA Litigation Group…

“Russell has strong subject matter expertise.”

“Russ is extremely responsive and practical. He listens to the client perspective and is hands on and engaged, while also delegating work as appropriate.” 

-Chambers USA

Russell L. Hirschhorn is co-head of Proskauer’s premier ERISA Litigation Group, which is a significant component of the firm’s ERISA Practice Center and globally renowned Labor and Employment Law Department.  Russell’s practice focuses on employee benefits issues arising under the Employee Retirement Income Security Act of 1974 (ERISA), including class action and complex litigation, U.S. Department of Labor and Internal Revenue Service investigations, and counseling clients on best practices to avoid litigation.

Russell has more than two decades of experience representing plan sponsors, fiduciaries, trustees, and service providers across the country.  His work on behalf of clients has included all types of plans, including 401(k) plans, 403(b) plans, defined benefit plans, employee stock ownership plans, executive compensation plans, health and welfare plans, multiemployer plans, multiple employer plans, and severance plans.  And, it has included the full gamut of claims arising under ERISA, including excessive investment and plan administration fees and investment underperformance claims; cash balance plan litigation; claims for benefits; company stock fund cases; claims for delinquent contributions; ERISA § 510 claims; ERISA statutory claims; ESOP litigation; executive compensation claims; independent contractor claims; independent fiduciary representations; multiemployer fund litigation; plan service provider claims; recoupment of plan overpayments; retiree benefits claims; severance plan claims; and withdrawal liability claims.

Deeply dedicated to pro bono work, Russell has been recognized on several occasions for his commitment to pro bono work including by President George W. Bush in receiving the U.S. President’s Volunteer Service Award.  His pro bono work has included serving as lead litigation counsel in several impact litigations: on behalf of social security recipients whose benefits were unlawfully suspended based on an outstanding warrant, deaf and hard of hearing prisoners in Louisiana prisons seeking disability accommodations, and Swartzentruber Amish in upstate New York to obtain religious exemptions from certain building code requirements. Russell also was a principal drafter of several amicus briefs for the Innocence Project, a legal non-profit committed to exonerating wrongly convicted people.

Photo of Malerie Bulot Malerie Bulot

Malerie L. Bulot is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group. She counsels clients on a myriad of issues related to employee retirement and health plans.  Malerie assists single employer…

Malerie L. Bulot is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group. She counsels clients on a myriad of issues related to employee retirement and health plans.  Malerie assists single employer and multiemployer plans with legal compliance, plan administration, and design and qualification.

Malerie received her J.D. and diploma in comparative law, magna cum laude, from Louisiana State University Paul M. Hebert Law Center, where she was a senior editor of the Louisiana Law Review and Order of the Coif. While at LSU, she served as a judicial extern to United States District Judge Shelly D. Dick, Middle District of Louisiana.