Commentary: Whose job is it anyway?

By J.J. Conway

Years ago, when a case that involved healthcare or retirement came into the office, the most fundamental question was: what is the source of the client's rights? It worked like a flowchart. If the answer was an employee benefit plan, then the case was likely going to be controlled by federal law and the claims would arise under the ERISA statute. That will always be the foundational inquiry in a benefits dispute.

A question of increasing importance now is: whose job is it to properly monitor and administer an employer's benefit plan? Here, a flowchart would ordinarily lead to the benefits department of a human resources division. That seems like a rational and logical answer. However, over the last decade, courts have grown increasingly more comfortable putting the onus on the employees to, themselves, constantly monitor the status of their benefit plans. To hold this view would be incorrect from both the employee and employer standpoint. The reason is itself pretty fundamental most employees do not have job descriptions that require them to monitor the actions of the benefit plan administrators. When a plan makes a mistake, it would upset the order of a traditional employment relationship for the courts to find that the employee should be monitoring the actions of the benefits department. However, that notion has been an unspoken trend in judicial decisions for several years.

ERISA cases have always been treated differently in the federal courts. Within the Sixth Circuit, and across the United States, district courts routinely schedule the entire case with a single briefing order. The order requires the parties to either stipulate to discovery or seek permission to conduct limited discovery, so discovery is not a given as it is in other cases. A case is resolved on written briefs that assert cross-positions, and usually without an oral argument. Often, courts dispense with a Federal Rule 16 Conference. Complex pension cases arising under ERISA are treated much like a Social Security Disability Insurance appeal, notwithstanding considerable differences in the law. In real world terms, it means that courts handling ERISA cases do not experience the same level of human interaction as in traditional civil litigation. The courts almost never see the parties or even the lawyers in court or in chambers.

This comes at a cost. In the adjudication of ERISA cases, it is remarkable to read how often the basics of an employer-employee relationship gets lost in the parties' arguments. More and more, courts seem to be missing the basics of how private companies run; namely, whose job is it to oversee the accuracy of the enrollment, monitoring, and administration of benefits? There is an increasing tendency of the courts in ERISA cases to let a benefits department off the hook for big, consequential errors and to shift the blame upon the employee for administrative errors at the plan level. Often, this shows up in a statute of limitations dismissal where the employee legitimately has no idea what the benefits department has done. It is a reflexive approach that might work in crafting a written opinion but is inconsistent with the real world setting and the working lives of employees in private companies.

The Supreme Court has always afforded considerable deference to decisions of benefit plan administrators. In Conkright v. Frommert, 559 U.S. 506, 513 (2010), the Court publicly voiced sympathy for plan administrators who make mistakes. In its holding, the Court stated, it would reject a "one-strike-and-you're-out" approach, meaning the plan's decision-makers would be permitted additional chances to arrive at a correct decision.

Those same rules are not applied equally to employees. In fact, "one-strike and you're-out" is the rule, not the exception, for the employee. Courts seem to forget that those employees working in the benefits department were in charge of benefits and the rest of the workforce had completely different job descriptions and responsibilities. Most American corporations would not want its employees spending their workday monitoring every aspect of their benefit plans performance; yet courts are increasingly becoming more receptive to the notion that employees should be carefully monitoring every aspect of their plan when there is some problem with missing pension credits or the failure to properly enroll an employee. The initial error date would be used for statute of limitations purposes to bar the bringing of a claim that the employee had absolutely no idea had even occurred.

The U.S. Supreme Court in Intel Corp. Inv. Policy Comm. v. Sulyma, 206 L. Ed. 2d 103 (2020) pumped the brakes a bit on this trend. In resolving a statute of limitations in a breach of fiduciary duty case, the Court required the plan to show that the employee had "actual knowledge" of an alleged fiduciary breach to file suit within three years of gaining that knowledge. A fair reading of Sulyma is that a textualist argument won out, although the case does read as if the outcome was arrived at begrudgingly.

Employers who offer benefit plans want their employees to pay a reasonable amount of attention to their plans. But employers do not want overkill here. They want employees doing the job duties listed in their job descriptions, not worrying needlessly whether the employees in the benefits department are doing theirs.

This basic aspect of private employment should be considered in reviewing ERISA benefit claims involving plan errors.

Sulyma's "actual knowledge" requirement is an important ruling - and increasingly important as more employees find errors in their pension contribution records or in the records of their fringe benefit plans, such as life insurance and healthcare.
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John Joseph (J.J.) Conway is an employee benefits and ERISA attorney and founder of J.J. Conway Law