:: Summary Plan Description Format Voids Benefit Limitations – Court Applies “Reasonable Participant” Standard Of Review

The “Limitation of Action” provision, buried deep in Section 9, is not in “close conjunction” to benefits provisions, Sections 1 and 2. Nor is there any reference, adjacent to the benefits description, to the page number on which the “Limitation of Action” provision appears.  . . .

If we were to hold that the placement of the limitation provision in Section 9 satisfies [the] “reasonable plan participant” standard under § 2520.102-2(b), we would, in effect, require a plan beneficiary to read every provision of an SPD in order to ensure that he or she did not miss a limitation provision.

Such a requirement is what the regulation is specifically designed to avoid.

Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 2014 U.S. App. LEXIS 21132 (9th Cir. Ariz. Nov. 5, 2014) (emphasis added).

The United States Supreme Court opinion in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011) has provoked discussion of a common practice in ERISA plan administration, namely, the use of a plan document in a dual role as that of a summary plan description as well.   Given the Court’s clear distinction between a summary plan description and the plan document in Amara, the practice of using the same document for both the plan and the SPD may seem inappropriate.

Regardless, failure to comply with ERISA’s procedural requirements has not really gained much traction in availing plaintiffs of a useful remedy.  (See comment note below).

The Spinedex opinion noted above, however, draws attention to a related but different problem that can occur when using a plan document to serve as an SPD as well.   If the length and format of the SPD fails to apprise the “reasonable plan participant” of benefit limitations, then a reviewing court may void the limitations period.  In other words, it’s not always what you say, but how you say it.

In Spinedix, for example, the plaintiffs were admittedly beyond the two year contractual period set forth in the plan documents.  The use of contractual limitations period to foreshorten the statutory limitations period is permitted under ERISA with rare exception.

Nonetheless, because the limitations period was “buried” deep within the SPD and not referenced or adjacent to the benefit provisions, the Court held the contractual limitations period was unenforceable.

A Department of Labor regulation imposes specific requirements for the placement and format in an SPD of a provision falling under § 1022(b). . . .[E] either (1) the description or summary of the restrictive provision must be placed “in close conjunction with the description or summary of benefits,” or (2) the page on which the restrictive provision is described must be “noted” “adjacent to the benefit description.”

In short, preparation of summary plan descriptions, so often treated as a relatively ministerial task, can make the difference in whether plan limitations are enforceable or not.  Language that is faultless in the plan document may be unacceptable in a summary plan description depending on the format and presentation of benefit limitation information.

Note:  Placement of deadlines in a disability section, rather than in an administration section has found favor.  See, Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899 (9th Cir. Cal. 2009).  Also, placement of a contractual limitations period in a  section entitled “Claims” has been held reasonable.  See Abena v. Metro. Life Ins. Co., 544 F.3d 880, 884 (7th Cir. 2008).  On the other hand, see the recent opinion in Moyer v. Metro. Life Ins. Co., 762 F.3d 503 (6th Cir. Mich. 2014) (limitation period for seeking judicial review not included in SPD at all).

Additional Implications – Failure to provide proper notice of time constraints as required by 29 C.F.R. § 2520.102-2(b) can also constitute an element in showing an abuse of discretion.  See, Parker v. Owens-Illinois Inc., 2001 U.S. App. LEXIS 31236 (5th Cir. La. Sept. 28, 2001).

Procedural Violations – The general rule is that no substantive remedy exists for procedural violations of ERISA.  See, Regency Hosp. Co. of Northwest Ark., LLC. v. Ark. Blue Cross Blue Shield, 2010 U.S. Dist. LEXIS 80734 (E.D. Ark. Aug. 5, 2010) (citingLewandowski v. Occidental Chemical Corporation, 986 F.2d 1006, 1010 (6th Cir. 1993) (“ERISA does not remedy procedural violations with a damage award”); Bolone v. TRW Sterling Plant Pension Plan, 130 Fed. Appdx. 761, 2005 WL 1027569 (6th Cir. 2005) (no substantive remedy available for alleged procedural violations of ERISA regulations governing “the format, style, and content of Summary Plan descriptions.”); Hakim v. Accenture United States Pension Plan, 656 F. Supp. 2d 801 (N.D. Ill. 2009)).

 Plan Document v. SPD – At the outset, I noted that the Amara opinion spawned a good deal of attention to the distinction between plan documents and summary plan descriptions.  An example of this line of discussion about the  existential aspects of “plans” and summary plan descriptions may be found in Professor Roger Baron’s article which appears here.

Regulation Text – “The description or summary of restrictive plan provisions need not be disclosed in the summary plan description in close conjunction with the description or summary of benefits, provided that adjacent to the benefit description the page on which the restrictions are described is noted.” 29 C.F.R. § 2520.102-2(b).