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Statute of Limitations


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I really don't know much about litigation, which is the reason for this post. I'm trying to get a grasp of how the statute of limitations works in context of ERISA claims. I know that much depends on the basis of the claim as ERISA has a 6 year SOL for fiduciary breaches. But what about nonfiduciary claims? I think courts generally go with state SOLs. Is that right? Would they use a SOL for breach of contract in the case of this kind of claim? In general, how long is that....3 years, more?

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S/l for benefit claims including 510, is closest analogous state law s/l. See Miles v. NY State Teamsters Conf., 698 F2d 593. S/l for benefit claim under 502 in NY/NJ is 6 yrs (breach of contract). NJ/ NY 510 s/l is 2 yrs. In some states closest s/l is for breach of contract/equity, in other states there is a specific s/l for employment/benefits claims. Since ERISA is law in equity only recovery under 502 is for benefits. There can be no claim for money damages, e.g, economic loss or compensatory damages.

S/l begins when there has been a repudiation of the participant's rights by a fiduciary which is clear and made know to the participant /beneficaries which can predate denial of claim for benefits. Davenport v. Harry N. Abrams, Inc. 249 F3d 130. Repudiaton can include reciept of a letter or plan amendment. Carey v. Int'l Bhd of Electrical Workers Local 363, 201 F3d 44, 47-48. E.g. s/l for filing lawsuit begins when letter from plan rep rejects employee's request for additional benefits, not 7 yrs later when claim for benefits is eventually denied on appeal.

Also participants must chose between benefit claims and breach of fid duty. Courts do not allow participants to sue under both theories. 502 actions for benefits are usually not permitted until claim is denied under 503 after appeals.

I thought there was a recent case where a fed ct allowed whipsaw claims under 502 where interest rate in plan violated ERISA/IRC 417. Employer argued that since employees received benefits provided under the terms of the plan, any claim for additional benefits due under ERISA /IRC 417 was a claim for money damages which was prohibited under ERISA. Ct held that claim under ERISA/IRC 417 was a claim for benefits since statute mandated interest rate provided under plan.

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How is this any different then an employee knowing that they are being under paid in violation of Title VII? The Supremes just said that the 180 day s/l for filing a claim with the EEOC for underpayment of wages for sex discrimination begins when the employee is first paid discriminatory wages not when employee discovers the fact 20 yrs later. S/l for fid breaches is generally 6yrs after date of last action. But what is the breach of fiduciary duty that accrues to participant who is paid a lower amount than he is entitle to since the remedy for a breach of fid duty under ERISA 409 is to make good losses to the plan? How has the plan suffered a loss for paying lesser benefits?

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How is this any different then an employee knowing that they are being under paid in violation of Title VII? The Supremes just said that the 180 day s/l for filing a claim with the EEOC for underpayment of wages for sex discrimination begins when the employee is first paid discriminatory wages not when employee discovers the fact 20 yrs later. S/l for fid breaches is generally 6yrs after date of last action. But what is the breach of fiduciary duty that accrues to participant who is paid a lower amount than he is entitle to since the remedy for a breach of fid duty under ERISA 409 is to make good losses to the plan? How has the plan suffered a loss for paying lesser benefits?

To an extent I think that it is different. I think that a member of protected class is more tuned in to discrimination than a rank and file employee is tuned into complicated cash balance calculations. That's probably less true than it was a few years ago, but I think it's still true. Not sure what good this argument will do me.

Anyway, I see your point about the breach of fiduciary duty and making good on losses.

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Okay, assume that a participant fills out the forms necessary to receive a distribution and then receives a lump sum payment shortly thereafter. Would filling out those forms be considered a claim for benefits? If so, what if the participant receives a lump sum that was calculated "incorrectly" under the whipsaw calculation and they don't discover the mistake until years later. If they don't appeal the claim within the time frames set forth in the claims procedures they would be prohibited from filing in federal court since they never exhausted administrative remedies. MJB, I think you are saying that that is a likely result, even if this is a whipsaw claim.

On the flip side, what if the submission of the distribution forms is not considered to be an initial claim for benefits? Is that possible? If so, how long would they have to file the initial claim under the claims procedures?

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A participant who receives a lump sum distribution can file a claim for benefits if he believes that the amount of the distribution was incorrect. However the s/l for commencing a law suit to receive additional benefits that the plan has refused to pay would be measured from the date of the distribution. Otherwise the s/l would never run on distributions that have been paid.

Plan can limit the time period for filing a claim for benefits after distribution to lesser period than that provied under s/l. For example, DB plans that offset for SS benefits sometimes use estimated SS wages to determine benefits under the plan. Plans will give employee period of one yr to provide correct SS wage information to revise DB benefits. If infornmation is not provided w/in 12 months the benefits will not be changed.

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MJB, I really appreciate your help and I'm hoping you could bear with me a little longer. With regard to your first paragraph, why would the s/l commence upon distribution? I thought it commenced upon repudiation? Are you saying that it commences upon distribution if they never file a claim (and therefore no repudiation)? It seems like the s/l would be moot at that point because a participant has to exhaust administrative remedies before filing in federal court. No?

With regard to your second paragraph, if the plan doesn't specifically limit when an initial claim must be filed then when must it be filed?

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I am going to change my prior opinons based on case law which concludes that a participant who receives a lump sum distribution cannot file a suit for benefits under ERISA because the employee is no longer a participant under ERISA. The law is very specific in holding that a colorable claim for benefits by a participant must exist at the time the law suit is filed and if a lump sum has been paid there is no basis for status as a participant. See Kuntz v. Reese 785 F2d 1410, Raymond v. Mobil Oil, 983 F2d 1528, Ericson v. Greenberg and Co, 2004 WL 2931048.

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The oddity about the results of some of these cases is that it could lead to mischief by plan administrators. Can a plan pay any sum to a participant, label it to be a 'lump sum' and thereby deprive the recipient of any standing to claim that the lump sum should have been more and that he or she has yet more benefits under the plan to be paid to him or her?

So before I request a lump sum, I better get the data and make my own computations and only request a lump sum in that amount. Otherwise when the plan pays me a 'lump sum', I lose any right to contest the amount at the first moment in time that I learn what that amount will be.

I don't dispute that the results/language of opinions are as mjb describes in his 5th post in this thread, but mjb's generalized response set forth in his 4th post is a much more sensible approach.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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I think that the employees will be prevented from suing for additional benefits after receiving a LS unless they can show Varity type of situation where they were induced to take the benefits under false pretenses, not that thay received a LS which could have a different value. One thing I have learned about LS distributions in DB plans is that no two actuaries ever come up with the same $ amount. There are some firms that specaialize in doing DB calculations for participants and demanding additional benefits but I have never understood why plans would pay additional benefits unless there was an obvious error such as not crediting correct service or SS wages.

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There is a blog in todays benefits links on a 7th circuit decision on standing to sue for additional benfits in an ESOP by former participants, Harzewski v. Guidant Corp, 2007 WL 1598097, decided June 5, 2007 which holds that former participants would have standing to sue a plan for additional benfits that they would be entitled to receive under the terms of the plan. (I.e. , not a claim for money damages). There is still the issue when the S/l for bringing such a claim begins.

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  • 1 month later...

The 3rd Circuit has also held that there is standing to sue for additional benefits (due to claimed breach of prudent investment rule) despite a 'lump sum' having previously been paid out. Graden v. Conexant Systems Inc., 3d Cir., No. 06-2337, 7/31/07

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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The Supreme Ct may have the last word on this issue in the LaRue v. DeWolff, boberg case which is pending for argument next term. Counsel for the plan has requested that the case be dismissed because the plaintiff who sued for investment loss received a lump sum from the plan in 2006 and therefore is not a participant who can bring a claim under ERISA.

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