Sixth Circuit Holds that Limitations Period for ERISA Underpayment Claim Does Not Accrue Earlier than the Alleged Underpayment

In Gragg v. UPS Pension Plan, No. 22-3379, __F.4th__, 2022 WL 17729625 (6th Cir. Dec. 16, 2022), a dispute alleging the underpayment of pension benefits, the Sixth Circuit held that “[t]he limitations period for an ERISA claim ‘to recover benefits due’ under a plan does not expire before the alleged underpayment on which the claim is based.”

In July 2010, the UPS Pension Plan and the UPS Retirement Plan sent Plaintiff-Appellant Ralph Gragg letters stating the amount that he would receive from each plan before and after he turned 65. Each plan stated it would reduce his monthly payment by the amount of his anticipated Social Security benefit. Eight years later, Gragg turned 65 and began receiving Social Security benefits. The plans reduced his monthly benefit by the entire amount of his Social Security benefit, which was a combined reduction of double the amount of his Social Security benefit. Gragg wrote to each plan explaining that this was not how the “leveling option is supposed to work” and he thought that the plans made an honest mistake. However, each plan responded to his letter stating that the reduced benefit amount was the correct amount.

In November 2020, Gragg brought suit against the UPS Pension Plan (which had merged with the UPS Retirement Plan) asserting a claim under 29 U.S.C. § 1132(a)(1)(B). He alleged that since August 1, 2018, the Plan (collectively) paid him less than he was entitled to each month. The district court found his claim time-barred on the theory that each plan told him ten years earlier the amounts that they would pay him after he turned 65. Per the district court, Gragg had six years from July 2010 to file a lawsuit, which he did not. Gragg appealed.

Reviewing the district court’s dismissal de novo, the Sixth Circuit reversed the district court’s judgment and remanded the lawsuit. The court explained that although Gragg had received the 2010 letters, there was no injury to discovery before August 1, 2018 when the Plan paid him less than the amount to which he claimed entitlement. Prior to that date, the Plan paid everything that Gragg was owed.

The Plan cited to Patterson v. Chrysler Group, LLC, 845 F.3d 756 (6th Cir. 2017) for the proposition that a claim accrues upon a “clear and unequivocal repudiation of benefits,” and the Julye 2010 letters constituted such repudiation. The court disagreed and explained that “the ‘repudiation’ formulation is merely a restatement of the discovery rule as applied in cases where a plan denies the plaintiff’s entitlement to benefits altogether.” There is no precedent where the court applied the repudiation formulation to determine the timeliness of a claim concerning the benefit amount.

The Plan also asserted that Gragg could have brought suit in July 2010 under 29 U.S.C. § 1132(a)(1)(B) “to clarify his rights to future benefits under the terms of the plan.” The court also disagreed. In July 2010, all Gragg had was two letters stating that his overall monthly benefit would be “leveled.” An ERISA claim based on letters alone would have rested upon “contingent future events that may not occur as anticipated, or indeed may not occur at all.” Gragg could have died before 2018 or the Plan may have changed its position. In July 2010, Gragg did not have a claim that was ripe, which means it would not have been justiciable under Article III. The Plan conflates a concrete dispute with a concrete injury and Gragg was not injured until he was underpaid. For these reasons, the court reversed the decision of the district court.