The Statutes of Limitations on Pension Payouts

The statute of limitations period for pension plans refers to the amount of time that an individual, or his decedents, have to file a legal claim related to a miscalculation, mishandling or dispute related to a pension plan. Under the law, the statute of limitations will begin to run when a legal claim accrues or the recipient obtains the right to pursue a legal remedy. Therefore, in order to fully understand the statute of limitations for pension payouts, you must first understand the laws and procedures involved in executing pension plans.

According to the United States Department of Labor, the Employee Retirement Income Security Act (ERISA) was enacted by Congress in 1974 to "set minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans." Therefore, the legal procedures, including matters related to limitations periods for filing a claim regarding a pension payout, must defer to the federal ERISA statute.

When a claim accrues or a ripe for litigation is an important aspect of defining the statutory limitations period for pension payouts. In the 2010 case of Cynthia Young v. Verizon's Bell Atlantic Cash B, the court determined that a claim to recover benefits under Section 502(a) of the ERISA statute accrues “upon a clear and unequivocal repudiation of rights under the pension plan which has been made known to the beneficiary." In other words, the statute of limitations will begin to run once the beneficiary of the pension has the right to receive the payout.

The ERISA statute does not proscribe a specific statutory period for pension payout claims; however, the court in Cynthia Young v. Verizon's Bell Atlantic Cash B highlighted the traditional procedure that is used in cases involving ERISA pension disputes. In such cases "the court will borrow the most analogous statute of limitations from state law." This, however, does not mean that the court will automatically borrow the state's limitations period in which the forum court is located. If another state has a more significant connection with the parties involved in the dispute or if the pension agreement contained a choice of law provision, the court will defer to the alternative state.

In the majority of cases, the most analogous state statutory period will be the time limit set for contractual actions. The statute of limitations for contractual disputes in most states is between four and six years. For example, the Commonwealth of Pennsylvania maintains a four-year statute of limitations period, while the state of Wisconsin allows for a six-year statue of limitations. Therefore, the applicable statutory period will depend upon the specific state laws that govern the action.