On September 29, the House of Representatives passed the Mental Health Matters Act (Act) which included the provisions of another bill previously introduced, the Employee and Retiree Access to Justice Act (ERAJA). While the Act principally deals with health plans and expanding access to mental health and substance abuse services, ERAJA amends ERISA in two important ways that will lead to much more ERISA retirement plan litigation.
Arbitration. ERAJA would invalidate and render unenforceable any arbitration provisions, class action waivers, and representation waivers for the purposes of claims brought under ERISA Section 502 as well as common law claims. There is an exception if particular rules (including a paper notice written to be understood by an average participant and 45-day waiting period) are followed. Agreeing to arbitration also cannot be a condition for participation under a plan.
Standard of Review. ERAJA would also legislatively remove the ability of plans to give the plan administrator discretion in deciding claims and having the administrator’s decision be given deference by a reviewing court that has been the law since the 1989 Supreme Court decision of Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Under that case, when the plan document gives the administrator discretion in deciding benefit claims, a reviewing court should not overturn the decision of the administrator unless it determines the administrator acted arbitrary and capricious. ERAJA would require all courts to use a “De Novo” standard when reviewing the decision, not giving any deference to the administrator. Multiemployer plans would not be subject to this change.
While ERAJA is just a bill that would have to pass the Senate and be signed by the President before becoming law, if it were to be enacted it would dramatically change the landscape of ERISA litigation. It would no doubt increase ERISA litigation and act as even more of a deterrent for employers to adopt private retirement plans.