Statute of Limitations: Sixth Circuit Applies Five-Year Statute to Benefit Election Dispute
Like all states, Kentucky maintains different statutes of limitations depending on the matter before the court. Cases involving private matters (i.e., a written contract dispute) have a 15-year statute of limitations, while cases based on statute violations have a five-year limitations period. The Sixth U.S. Circuit Court of Appeals (which covers Kentucky) recently held that Kentucky’s five-year statute of limitations applies to federal Employee Retirement Income Security Act of 1974 (ERISA) claims regarding disputes over the effectiveness of a spouse’s consent to a participant’s benefit election.
Thomas Redmon, a union employee of Sud-Chemie Inc., was a participant in the Sud-Chemie Inc. Retirement Plan for Union Employees. He retired in January 1998 and elected to receive his benefits in the form of a straight life annuity. His spouse, Doris, signed the “Designation of Form of Benefit Payment” (DFBP), consenting to the distribution of benefits in the form of a straight life annuity and waiving her survivor benefits under the plan should he predecease her. Thomas started receiving retirement benefits on February 1, 1998, and continued to receive them until his death on October 5, 1999. Following his death, Doris didn’t receive any benefits under the plan.
More than six years later, on May 18, 2006, Doris made a claim for survivor benefits under the plan. Following her administrative appeal, she filed a complaint in the U.S. District Court for the Western District of Kentucky alleging that her waiver of survivor benefits and her husband’s election of the straight life annuity on the DFBP were invalid. Sud-Chemie alleged that her claim was time-barred under KRS § 413.120(5), which provides a five-year statute of limitations for “damages for withholding real or personal property.”
Sud-Chemie also argued that Doris’ claim accrued when her husband received his first annuity payment from the plan or, in the alternative, when it ceased making payments after his death. Doris contended that the applicable statute of limitations was KRS § 413.090(2), which allows 15 years to file a claim based on a written contract. She also argued that her claim didn’t accrue until after she made a claim for benefits and the claim was denied, thereby exhausting the administrative process. The district court found in favor of Sud-Chemie.
Sixth Circuit’s ruling
The Sixth Circuit found that “in the absence of a federally mandated statute of limitations, the court should apply the most analogous state law statute of limitations.” The court noted that in the absence of a more specific statute, the 15-year statute of limitations for claims based on a written contract normally would apply. However, the court found that KRS § 413.120(2), which imposes a limitations period of five years for “an action upon a liability created by a statute, when no other time is fixed by the statute creating the liability,” was more analogous. Accordingly, the court agreed with the trial court and applied a five-year statutory period to Doris’ claims.
The Sixth Circuit stated that a claim accrues “when a fiduciary gives a claimant clear and unequivocal repudiation of benefits.” It further explained that the fiduciary’s repudiation need not be formal and that informal repudiation alone would provide notice to a claimant.
The court concluded that Doris’ claim originated in October 1999, when Sud-Chemie stopped making monthly annuity payments after Thomas’ death. The court reasoned that this constituted a clear and unequivocal repudiation of her claim to survivor benefits, just as clearly as if Sud-Chemie had sent a letter to her stating that her benefits had been denied. Therefore, the five-year statute of limitations expired in October 2004, one and one-half years before Doris submitted her formal claim. Thus, her claim was time-barred, and the district court’s judgment was affirmed. Redmon v. Sud-Chemie Inc. Retirement Plan for Union Employees.
This case is unusual because Kentucky courts typically apply the 15-year statute of limitations to claims for benefits under the terms of an employee benefit plan to enforce rights under the plan’s terms or to clarify rights to future plan benefits. In this case, the court applied a five-year statute.
Determining the applicable statutory period for an ERISA claim has important implications for plan sponsors and fiduciaries — particularly with respect to their document retention policies. A claim for benefits under an employee benefit plan can be filed long after employment has ended or participation has ceased. Plan sponsors are encouraged to maintain permanent records of all formal plan documents, summary plan descriptions, beneficiary designations, and benefit distribution election forms.
If you have any questions or need help, please contact any member of the Greenebaum Doll & McDonald Labor and Employment Department.
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KENTUCKY EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Kentucky employment law. Questions about individual problems should be addressed to the employment law attorney of your choice.