Last week the U.S. Court of Appeals for the Seventh Circuit ruled that the deadline imposed under ERISA for plan administrators to decide on benefit claims is a “bright line” rule. The court held that when a plan administrator misses this deadline, the “substantial compliance” exception to statutory compliance does not apply and the plan administrator loses the benefit of deference, causing a de novo standard of review to apply to the court’s analysis of the plan administrator’s determination.

Donald Fessenden sued Reliance Standard Life Insurance Co. after Reliance denied his claim for long-term disability benefits. Fessenden argued that because Reliance did not enter a final decision denying his claim for long-term disability benefits until after the statutory 45-day deadline for deciding, the plan administrator forfeited its right to a favorable review standard due to the statutory violation. The Seventh Circuit agreed with Fessenden and held that when a plan administrator misses a statutory deadline the administrator is no longer in “substantial compliance” with the statute and the district court should review the administrator’s decision de novo rather than under a deferential standard of review.

Although the court held that a plan administrator that misses a statutory deadline cannot be in “substantial compliance” with the statute, the Seventh Circuit rejected the Second Circuit’s holding in Halo v. Yale Health Plan, 49 F.3d 24 (2d Cir. 2016) and refused to abrogate entirely the doctrine of “substantial compliance.” Rather, the court narrowly held that the doctrine does not apply to the violation of regulatory deadlines, so “when that time is up, it’s up.”

The case is Fessenden v. Reliance Standard Life Ins. Co., 7^th Cir., No. 18-1346, 6/25/19.

Key Takeaway: Plan sponsors who want the deferential arbitrary and capricious standard of review to apply to their benefit determinations must remain conscious of, and comply with, applicable claim review deadlines.