If you run a retirement plan, a health plan, or work as a third party administrator, a new court ruling could change how lawsuits against your plan are handled.
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In Rani Bolton v. Inland Fresh Seafood Corporation of America, Inc., employees said their company’s ESOP (a type of retirement plan that holds company stock) paid far too much for company shares. They claimed the people running the plan broke the rules by overpaying.
In the past, the Eleventh Circuit (the federal appeals court covering Alabama, Florida, and Georgia) required employees to go through a plan’s internal complaint process before filing a lawsuit. That rule came from a 1985 case called Mason v. Continental Group, Inc.
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The court overruled that old rule. It held that ERISA (the federal law that governs employee benefit plans) does not force employees to exhaust a plan’s internal appeals process before going to court on statutory claims, such as claims that plan fiduciaries breached their duties.
The court acknowledged that its old approach “has not withstood the test of time.” Seven other federal circuits already reached the same conclusion: employees bringing statutory ERISA claims do not need to go through the plan’s internal process first.
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This ruling only applies to statutory claims (like breach of fiduciary duty). It does not change the rules for employees who are challenging a denied benefits claim under the terms of their plan. In those cases, the internal appeals process still applies.
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This decision means employees may be able to take plan fiduciaries to court more quickly, without jumping through extra hoops first. Retirement plan committees, health and welfare plan committees, and third party administrators should talk to their ERISA counsel about what this ruling means for their plans and whether their procedures need to be updated.