Exhaustion of Administrative Remedies

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On November 24, 2017, the Department of Labor (“DOL”) released regulations finalizing a 90-day delay on the application of new claims procedures for disability claims. The Obama-era regulations providing for the new claims procedures were set to become effective for disability claims filed on or after January 1, 2018. In the absence of additional regulatory…

On October 10, 2017, the Department of Labor (“DOL”) released proposed regulations that would delay for 90 days the effective date of the final disability claims procedures regulations finalized on December 19, 2016. As explained in our August 1, 2017 blog entry, the new disability claims procedures added various participant protections and rights to…

As open enrollment approaches for many benefit plans, employers and plans sponsors should check to make sure their claims procedures for disability claims are consistent with regulations that become effective for plan years beginning on and after January 1, 2018.  These regulations apply to ERISA-covered short-term and long-term disability plans, as well as retirement plans that provide disability benefits that require disability determinations by the plan administrator (as opposed to relying on a Social Security Administration determination or long-term disability plan determination).  The new disability claims procedures are largely meant to track, with some differences, the enhanced disclosure and claims procedures established for medical claims by the Affordable Care Act.  Below are the key components that employers and plan administrators should consider.

On November 18, 2015, the Department of Labor (the “Department”) published a notice of Proposed Rulemaking at 80 Fed. Reg. 222 (the “Proposed Rule”) to amend ERISA’s claims procedures (29 C.F.R. 2560.503-1) as they apply to claims for disability benefits.  One of the purposes of the Proposed Rule is to make ERISA’s claims procedures for disability claims consistent with the Affordable Care Act’s claims procedures for group health plans.  The Proposed Rule contains several components.

Background

The U.S. Court of Appeals for the Second Circuit recently joined the U.S. Courts of Appeals for the Seventh and Eleventh Circuits in concluding that Employee Retirement Income Security Act plan participants are not required to exhaust their administrative remedies when “they reasonably interpret the plan terms not to require exhaustion.” Applying this principle, the court, in Kirkendall v. Halliburton Inc., 2013 BL 23838 (2d Cir. Jan. 29, 2013), held that plaintiff Kathy Kirkendall could proceed with her claim for clarification of future pension benefits without first exhausting the plan’s administrative claims procedures.

Kirkendall was employed by Dresser-Rand Co. and then Halliburton Inc. As a result of several corporate restructurings, Halliburton informed employees that their last date of employment for pension plan purposes was March 1, 2000. The consequence of this corporate restructuring for Kirkendall was that she would no longer be eligible for an early retirement subsidy and her early retirement benefit would not be as high as previously quoted to her.

Over the course of nearly five years, Kirkendall made several efforts to understand the changes made to the pension plan. Kirkendall wrote to the benefits department on two occasions but received no response on either occasion. She also spoke to someone in the benefits department and was told that she had already received all of the monies due to her.

Kirkendall subsequently filed a complaint in federal court alleging several claims, all stemming from her assertion that Halliburton had incorrectly determined that she and her coworkers had been terminated for pension plan purposes as of March 1, 2000. The district court, in relevant part, granted Halliburton’s motion for judgment on the pleadings because Kirkendall failed to exhaust her administrative remedies.

In McCay v. Drummond, 2013 WL 616923 (11th Cir. Feb. 20, 2013), the Eleventh Circuit held that deficiencies in a notice of denial of benefits did not excuse a participant’s failure to appeal within a designated 180-day time period. In so ruling, the Court reasoned that plaintiff’s allegations of defendant’s noncompliance with ERISA’s technical…