Statute of Limitations for ERISA Benefits Lawsuits vs. Puerto Rico Plans

Retirement plans in operation in Puerto Rico can impose a statute of limitations for the filing of ERISA claims for benefits that is substantially shorter than the four-year period that would apply absent such a plan-imposed period.  However, to be valid and enforceable the plan-imposed period must be:

1. Reasonable,
2. Incorporated within the official plan documents, and
3. Disclosed in the notification of benefit determination that the claims administrator issues to the claimant as part of the internal review process under ERISA § 503.

Otherwise, lawsuits for benefits under ERISA § 502(a)(1)(B) filed against Puerto Rico plans are generally subject to a four-year statute of limitations.

Four-Year Default

Since ERISA itself does not establish a statute of limitations for bringing civil actions for the payment of plan benefits, federal courts, including the U.S. Court of Appeals for the First Circuit (i.e., the appellate court with jurisdiction over Puerto Rico), borrow for such purposes the most closely analogous statute of limitations for the forum state.  In the case of claims by local participants for the payment of benefits under a retirement plan established and administered in Puerto Rico, that would be the four-year statute of limitations for personal actions set forth in Article 1203 of the Puerto Rico Civil Code of 2020, as amended, 31 L.P.R.A. § 9495.

Previously the statute of limitations was fifteen years (Santaliz-Rios v. Metro. Life Ins. Co., 693 F.3d 57 (1^st Cir. 2012)), but due to the enactment of the Civil Code of 2020, effective November 28, 2020, the default statute of limitations is just four years.

Period Reasonableness

A retirement plan can validly provide a shorter statute of limitations for benefit claims, so long as that period is reasonable (Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99 (2013)).  The First Circuit has found a three-year period to be reasonable (Santana-Diaz vs. Metropolitan Life Ins. Co., 816 F3d 172 (1^st Cir. 2016)), and most local plan sponsors and benefits practitioners feel comfortable with a one-year statute of limitations.

While some federal courts have approved plan-imposed periods shorter than one year (see, e.g., North Lake Regional Medical Center vs. Waffle House Sys. Employee Benefit Plan, 160 F.3d 1301 (11^th Cir. 1998), approving a 90-day period), Puerto Rico retirement plans with a statute of limitation below one year are very rare, probably because neither the First Circuit nor the U.S. District Court for the District of Puerto Rico have ever endorsed such a period.

Plan Document Incorporation

Several federal courts have held that, to be enforceable, plan-imposed statutes of limitations must be adequately described in the SPD.  Moreover, given the Supreme Court’s position that SPDs cannot override official plan documents (CIGNA Corp. v. Amara, 563 U.S. 421 (2011)), the relevant statute of limitations must also be incorporated within the official plan document itself.  An individual plan amendment to such effects does not have to be filed with the Puerto Rico Department of the Treasury, because it has no impact on the plan’s local tax qualification.

Notification Disclosure

Pursuant to 29 CFR § 2560.503-1(g)(1)(iv), the notification of an adverse benefit determination must include, among other items, “a description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under [ERISA § 502(a)] following an adverse benefit determination on review.”  Based on that rule, the First Circuit has held that, together with reference to the claimant’s right to bring a civil action under ERISA § 502(a), “a denial of benefit letter must include notice of the plan-imposed time limit for filing a civil action” (Santana-Diaz, supra, at 180).  Failure to do so renders the plan-imposed limit inapplicable, thus triggering the four-year default period.