Fifth Circuit Excuses Claimant from Exhausting Administrative Remedies Because the Fund Did Not Substantially Comply with ERISA’s Notice Requirements

A recent decision from the Fifth Circuit Court of Appeals is a cautionary tale for plan administrators to comply with ERISA’s notice requirements when they issue a benefit claim decision. In Theriot v. Building Trades United Pension Trust Fund, No. 20-30126, __F.App’x__, 2021 WL 955152 (5th Cir. Mar. 12, 2021), Plaintiff-Appellant Deborah Theriot’s mother, Audry, was the surviving beneficiary of her late husband’s pension plan sponsored by Defendant Building Trades United Pension Trust Fund. Audry sought to convert her post-retirement survival benefits from a monthly annuity to a lump sum. The Fund received Audry’s request by the deadline to submit the change form but then Audry passed away the next day. Theriot sought payment of the lump sum but the Fund denied the claim because Audry was not alive on the date the lump sum would be paid. The Fund communicated this to Theriot by letter dated April 18, 2017. On January 5, 2018, Theriot sent a letter to the Fund demanding payment of the lump sum. On March 2, 2018, the Fund responded stating that the January 2018 letter requesting review was untimely because it was not submitted within 60 days of April 2017 denial. The March letter enclosed the Plan’s procedural requirements. Theriot did not appeal that determination and filed suit.

The district court dismissed two of the claims for failure to exhaust administrative procedures. It “held that (1) the Pension Fund substantially complied with ERISA’s notice requirement in its March 2018 letter, (2) that letter initiated the Plan’s administrative review process, and (3) Theriot failed to timely appeal that letter within 60 days.” The district court further held that the Fund’s failure to comply with ERISA’s notice requirements in its April 2017 letter and its failure to send a compliant benefit determination within 90 days of Audry’s claim did not excuse Theriot from failing to appeal within 60 days.

As the Fifth Circuit explained, “[t]he crux of this appeal concerns ERISA’s requirement that claimants seeking benefits from an ERISA plan first exhaust administrative remedies available under the plan before bringing suit.” In general, a claimant must exhaust any administrative remedies set forth in an ERISA plan. If a plan administrator fails to establish or follow claims procedures consistent with ERISA’s requirements, then a claimant is excused from exhausting administrative remedies and is deemed to have exhausted them.

The court determined that the March 2018 letter, assuming it was a denial of an appeal, failed to substantially comply with ERISA’s requirements that the notice describe any voluntary appeal procedures offered by the plan. The court found that the letter discouraged Theriot from seeking administrative review. Even though the letter enclosed the plan’s appeal procedures, the March 2018 letter stated that her request for review was untimely and that she could not seek judicial review. The court concluded that the March 2018 letter did not substantially comply with ERISA’s notice requirement because it was ambiguous about Theriot’s appeal rights. The Fifth Circuit vacated the dismissal of the action with instructions to the district court to remand the claim to the Fund so that it can evaluate the merits of Theriot’s pension claim.