On March 4, 2014, in Riley v. Metropolitan Life Insurance Co., the US Court of Appeals for the First Circuit rejected a plan participant's argument that payments under a long-term disability plan governed by the Employee Retirement Income Security Act of 1974 (ERISA) are analogous to an installment payment plan for purposes of calculating the statute of limitations. Joining the Second, Third, and Ninth Circuits, the court held that a cause of action for ERISA benefits accrues when an ERISA plan’s repudiation of a claim is first made known to the beneficiary. Therefore, even if ERISA payments are made periodically over the course of time, the statute of limitations begins to run on the date the plaintiff received the first clearly insufficient payment ( (1st Cir. Mar. 4, 2014)).

The plaintiff, Robert Riley, worked as an associate general manager at MetLife. After experiencing chronic pain and depression, Riley left his role and received short-term disability benefits. He later returned to work but in a lower-paying, non-managerial position. When his pain returned the following year, he once again left work and received short-term disability benefits and was later approved for long-term disability benefits. MetLife calculated Riley’s long-term disability benefits using his lower, non-managerial salary, which resulted in a smaller monthly benefit (factoring a Social Security offset) than if his managerial salary had been used. When he received the first payment on April 15, 2005, he disputed the calculation and refused to cash the check. MetLife continued to send payments until December 2005, when Riley requested they stop. Riley brought a state court suit in 2007 that was later dismissed. He then sued in the US District Court for the District of Massachusetts under ERISA on March 22, 2012. MetLife moved for summary judgment, arguing that the suit was time-barred. The district court granted the motion, and Riley appealed.

The First Circuit affirmed dismissal of the action. The court noted that because ERISA does not provide a statute of limitations in this context (an action to recover unpaid benefits from non-fiduciaries), it applied the most analogous statute of limitations, a six year period for breach of contract, from the forum state of Massachusetts. In applying federal common law to determine when the claim accrued, the court rejected Riley’s claim that the ERISA plan must be treated as a continuing violation or as an installment contract, with a new limitation period for each payment. (Under this argument, Riley's ERISA benefits claim would still be timely as to the monthly payments made within six years of when the claim was filed.) Rather, the court joined three other circuits and held that the claim accrued on the date Riley received and noted the first underpaid amount. As a result, his claim was time-barred. The court reasoned that its approach is consistent with the purpose of statutes of limitations, which is to ensure the timely litigation of disputes before the evidence becomes stale. It is also consistent with the policies underlying ERISA to promote predictability of a plan sponsor's benefits liabilities, and to enable ERISA plans to rely on their initial calculations.

Plan sponsors facing benefits litigation in the First Circuit will welcome this decision, which offers a clear accrual date in ERISA benefit actions, based on when the plan denies a participant's or beneficiary's claim and makes that repudiation known to the individual. On a related issue involving when the statute of limitations begins to run in an ERISA benefits claim, the Supreme Court recently ruled, in Heimeshoff v. Hartford Life & Accident Ins. Co., that an ERISA plan participant and the plan may agree in the plan document to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable (134 S.Ct. 604 (2013); see Legal Update, Supreme Court Upholds Limitations Period in ERISA Disability Plan).

For more information about calculating statutes of limitations for a particular jurisdiction, see Statutes of Limitation: State Q&A Tool.