On December 16, 2016, the U.S. Department of Labor (DOL) published final regulations altering the procedures for disability benefit claims for all plans governed by the Employee Retirement Income Security Act (ERISA). This includes both short-term and long-term disability plans and can also include qualified retirement plans if the benefit claim is based on the plan’s determination that the participant is disabled. If the determination of disability is made by a party other than the retirement plan (e.g., the Social Security Administration), the new regulations would not apply. The final rules will apply to all claims for disability benefits made on or after January 1, 2018.
The following are brief highlights of additional requirements of the regulations:
Independence and Impartiality – Benefit determinations must be made in a manner that ensures there is no conflict of interest of the decision-makers involved in the process. Plans cannot provide bonuses to claims adjudicators as a reward for denying claims. Plan administrators must ensure that a third-party service provider’s polices, practices and decisions (i.e., hiring, firing, compensation, promotions, etc.) will not result in
the denial of benefits.
Notices – Denial notices must provide a more detailed explanation of the reason for the rejection of a claim. For example, the notice must explain why the plan administrator disagrees with the opinions of the health care professionals or the Social Security Administration’s determination of the disability. The claimants must be informed of their rights to access their claim files and other relevant documents free of charge. Benefit denial
notices must be written in a linguistically and culturally appropriate manner. If the participant’s address is located in a county where 10% or more of the population is literate only in the same non-English language: (i) the notice must include a prominent one-sentence statement in the relevant non-English language about the availability of language services; (ii) the plan will be required to provide oral language services; and (iii) written notices in the applicable non-English language must be provided upon request.
Claims Procedures – The plan administrator must explain the protocols that were used to determine the participant’s benefit claim. If a plan failed to strictly adhere to the rules for processing initial disability claims and appeals, a claimant would be deemed to have exhausted the administrative procedures under the plan. This gives the claimant the right to file a lawsuit without further delay under a de novo standard of review, unless “minor exceptions apply.” The claimant would not be permitted to file suit if the plan’s violation was: (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good faith exchange of information; and (v) not reflective of a pattern of non-compliance.
Appeals – Before an appeal can be denied, claimants must be given notice and a fair opportunity to respond if the appeal is denied based on new or additional rationales or evidence. During any appeal process, plan administrators must automatically provide any new or additional evidence or rationale to the claimant as soon as it becomes available. Appeal denial letters must describe any applicable plan-imposed time limits on filing a
lawsuit, as well as a date the limitation period expires.
Rescissions of Coverage – A rescission of disability coverage occurs when a plan administrator terminates a participant’s coverage retroactively. Certain rescissions of coverage must be treated as a denial of benefits. As a result, participants may now appeal rescissions of coverage. However, a rescission based on the participant’s non-payment of premiums is not considered a denial of benefits.
These modified procedures for ERISA-covered disability plans expand participant rights and the responsibility of plan sponsors to provide a fair, impartial and independent process with full disclosure to the claimant. We recommend that employers work with their service providers and insurers to begin reviewing their claims and appeals procedures for compliance with the new regulations.
If you have questions or would like more information, please contact Therese Cheevers at firstname.lastname@example.org or 844.4WINDES (844.494.6337).