In Hitchcock v. Cumberland University 403(b) DC Plan, the Sixth Circuit decided what could be a very important case in ERISA litigation. Practitioners are familiar with the common injunction upon plaintiffs to exhaust administrative remedies before they seek relief in court, as well as the limited and narrow exceptions to that requirement. But the question has remained open whether exhaustion is required where plaintiffs allege a violation of statutory rights under ERISA, rather than merely a wrongful denial of benefits.

In Hitchcock, Plaintiffs were a class of employees at Cumberland University who participated in the University’s 403(b) plan. Since 2009, Cumberland had abided by an earlier-adopted 5% contribution for employees. But in October 2014, the University amended its plan to make the contribution discretionary, and on a retroactive basis. It proceeded to announce that contributions for the 2013-2014 and 2014-2015 years would be zero. There were also questions regarding notice of the amendment to change contributions, and whether the amendment was permitted under an earlier Summary Plan Description. Plaintiffs’ lawsuit included allegations against the University of violating ERISA itself.

The District Court granted the University’s motion to dismiss the ERISA claim for failure of the plaintiffs to first exhaust internal administrative remedies. The Sixth Circuit reversed and remanded, holding, as a matter of first impression, that the exhaustion requirement is inapplicable where plaintiffs’ allegation is of violations of statutory rights. The opinion drew, and then emphasized, a distinction between actions brought to enforce the terms of a plan – such as a basic wrongful denial claim – and those claims brought to enforce the statute itself – wherein, as here, a plaintiff asserts that the terms of a plan violate ERISA itself. In this case, for instance, the Plaintiffs had not sought merely monetary damages for the denial of benefits, and they were not challenging the University’s calculations. Rather, they were challenging the legality of the University’s amendment as a violation of the plain text of ERISA. The Sixth Circuit held that “the legality of the amendment is a question best suited for the courts to decide.” The court recognized that in so holding, it joined one side of a split among the circuits. The court’s interpretation joined the Third, Fourth, Fifth, Ninth, Tenth, and D.C. Circuits. The Seventh and Eighth Circuits, on the other hand, have held that the exhaustion prerequisite applies even where the plaintiff is asserting statutory rights.