Pension & Benefits News COVID-19 pandemic not a trigger for equitable tolling of plan’s limitations period
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Tuesday, January 19, 2021

COVID-19 pandemic not a trigger for equitable tolling of plan’s limitations period

By Pension and Benefits Editorial Staff

A federal trial court in California declined to recognize the COVID-19 pandemic as a reason to equitably toll the 180-day limitations period set forth in a 401(k) plan and permit a participant’s former spouse to contest her denial of benefits claim. However, her breach of fiduciary claim was not time-barred because it was governed by ERISA Sec. 413, and not by the contractual limitations period.

An employee’s marriage ended in 2008. A marital settlement agreement (MSA) awarded to the employee’s former wife a portion of the employee’s benefits in the employer’s 401(k) plan. In March 2008, the plan administrator accepted the MSA as a valid qualified domestic relations order (QDRO).

Over a decade later, in March 2019, the former spouse filed a claim for benefits under the plan. Denying the spouse’s claim and her subsequent appeal, the employer’s benefits committee asserted that the benefits awarded to the spouse had already been paid or distributed in some manner to the spouse.

The spouse filed suit in district court, alleging wrongful denial of benefits under ERISA Sec. 502(a)(1)(B) and breach of fiduciary duty under ERISA Secs. 404 and 502(a)(3). She also sought declaratory relief. The benefits committee countered with a motion to dismiss, arguing that all the spouse’s claims were time-barred, either under the terms of the plan or by statute.

Denial of benefits. The court agreed with the benefits committee that the spouse’s benefits claim was time-barred under the 401(k) plan’s contractual limitations period. The spouse filed suit 205 days after receiving notice of the denial of her administrative appeal, but the plan required such suits to be filed within 180 days of receipt of the benefits denial.

The spouse urged the court to apply the doctrine of equitable tolling to the contractual limitations period. The COVID-19 pandemic prevented her from filing suit within the prescribed time period, the spouse asserted. To support this assertion, she cited, among other things, the California Stay-at-Home Order issued March 19, 2020 and several Orders of the Chief Judge of the Southern District of California issued in March 2020.

Equitable tolling may apply to contractual limitations periods, the court explained, but a litigant must show that she pursued her rights diligently and that some extraordinary circumstances stood in her way.

The court rejected the request for equitable tolling, concluding that the circumstances surrounding the global pandemic did not prevent the spouse from filing her action. The courthouse remained open. The spouse could have filed suit without physically entering the courthouse. Other litigants—both those with counsel and those filing pro se—successfully filed claims during the relevant period. The court therefore dismissed the denial of benefits claim under ERISA Sec. 502(a)(1)(B) without leave to amend.

Breach of fiduciary duty. In contrast, the court declined to dismiss the spouse’s breach of fiduciary duty claim under ERISA Sec. 502(a)(3). The court rejected the benefit committee’s assertion that the spouse’s fiduciary breach claim is also governed by the contractual 180-day period. It concluded instead that ERISA Sec. 413’s limitations period governs the fiduciary breach claim under ERISA Sec. 502(a)(3).

The court acknowledged that conflicting, nonbinding authority existed as to whether a plan’s limitation provision can supersede ERISA Sec. 413’s limitations provision with respect to a plaintiff’s 502(a)(3) claim. However, the court determined that ERISA Sec. 413 is a “controlling statute” that supersedes the plan’s limitations period. While the Supreme Court has not ruled conclusively on this issue, recent decisions (Heimeshoff v. Hartford Life & Acc. Ins. Co., 571 U.S. 99 (2013); Intel Corp. Inv. Policy Comm. v. Sulyma, 140 S. Ct. 768 (2020) reveal the Court’s “inclination” to so treat ERISA Sec. 413.

Applying ERISA Sec. 413 to the spouse’s fiduciary duty claim, the court noted that her allegations focus on the fiduciaries’ activities surrounding the 2019 claim and appeal denials. Thus, her claim is not time-barred either under ERISA Sec. 413’s six-year or its three-year limitations periods.

Source: Sargent v. Southern California Edison 401(k) Savings Plan (DC CA).

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