On November 18, 2015, the Employee Benefits Security Administration published new proposed regulations for ERISA disability claims (RIN 1210-AB39; Regulation 29 C.F.R. §2560.503-1).  The Public Comment period runs through January 19, 2016.  I prepared and submitted the following comments regarding two of the most significant proposed changes in claims regulations for plans providing disability benefits:

Dear Assistant Secretary Borzi:

I write to offer comments on the proposed regulations for amending the claims procedure regulations applicable to disability benefit plans.  I am interested in the content of these regulations because I am an attorney whose practice is focused on the representation of claimants in ERISA-governed long term disability benefit disputes.  I am well poised to comment, because I have worked in the field since 2003 and practiced in this area of law since I became licensed in May 2009.  My experience includes handling both administrative appeals and litigating these claims.

I.  Comment on Notice for Applicable Statute of Limitations

The DOL has invited comment in the statute of limitations issues that have developed since the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accid. Ins Co., 134 U.S. 604 (2013).  I agree that this is a crucial area for regulation as the Heimeshoff decision has created confusion and much litigation.  Prospective clients often come to me with claims that they can no longer pursue, because they were not provided the information necessary for them to understand what the statute of limitations was that applied to their claim.  The DOL can assist by creating standards for what is a reasonable plan-based limitations provision in the same way that the DOL used its regulatory power to create timing deadlines for the claims process in prior versions of the regulations. Since Heimeshoffleft open the possibility that an internal limitations period could run before the appeals process is complete even where exhaustion is mandatory, the DOL is in a good position to clarify that such an approach would violate full and fair review required by 29 U.S.C. §1133.

Additionally, because contractual limitations periods are plan terms, the claimant should receive notice about the limitations period from the plan just as is the case with other plan terms. As the DOL aptly points out in the preamble to these proposed regulations, plan administrators are in a better position to know the date of the expiration of the limitations period and should not be hiding the ball from claimants if the plan administrator is functioning as a true fiduciary.

The additional of such a requirement is not inconsistent with case law.  One court has interpreted the existing regulations to require notice of the expiration of a limitations period. Kienstra v. Carpenters’ Health & Welfare Trust Fund of St. Louis, No. 4:12CV53 HEA, 2014 WL 562557, at *4 (E.D. Mo. Feb. 13, 2014), aff’d sub nom. Munro-Kienstra v. Carpenters’ Health & Welfare Trust Fund of St. Louis, 790 F.3d 799 (8th Cir. 2015)(“[a] description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of [ERISA] following an adverse benefit determination on review.” 29 C.F.R. § 2560.503–1(g)(iv)). This is a minority perspective.  Here, the DOL should do more than interpret its own rules; it should re-write them to remove any ambiguity.

I recommend an amendment to the regulations governing the manner and content of notification of benefit determinations on review.  29 C.F.R. §2560.503-1(j) [proposed regulation]:  the amended language should require the claims administrator to notify the claimant of the date of the expiration of any plan based limitations period and should include a definition of what is a reasonable limitations period.  Such an alteration takes care of the different courts’ views on when claims “accrue” in that it makes clear that no limitations period can start before the internal claim and appeals process is complete.  It also makes clear that there will be at least a one-year period after the completion of the plan’s appeals process in which a claimant can file suit.  The justification for this rule is that it would cut down on litigation devoted to the threshold issue of the running of the limitations period.  In addition, it may well lead to a standardization of internal limitations periods that would be salutary for both claimants and plan administrators.

Accordingly, I propose amending the proposed regulation by adding a section as follows and renumbering accordingly (added language is indicated by bolding and underlining):

29 C.F.R. 2560.503-1 (j)(6) [proposed regulation]

In the case of an adverse benefit decision with respect to disability benefits— (i) A discussion of the decision, including, to the extent that the plan did not follow or agree with the views presented by the claimant to the plan of health care professionals treating a claimant or the decisions presented by the claimant to the plan of other payers of benefits who granted a claimant’s similar claims (including disability benefit determinations by the Social Security Administration), the basis for disagreeing with their views or decisions; and (ii) Either the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan relied upon in making the adverse determination or, alternatively, a statement that such rules, guidelines, protocols, standards or other similar criteria of the plan do not exist.

(7) In the case of an adverse benefit determination on review with respect to a claim for disability benefits, a statement of the date by which a claimant must bring suit under 502(a) of the Act. However, where the plan includes its own contractual limitations period, the contractual limitations period will not be reasonable unless:

a.         it begins to run no earlier than the date of the claimant’s receipt of the final benefit determination on review including any voluntary appeals that are taken;

b.         it expires earlier than 1 year after the date of the claimant’s receipt of the final benefit determination on review including any voluntary appeals that are taken;

c.         the administrator provides notice to the claimant of the date that the contractual limitations period will run;  and

d.         the contractual limitations period will not abridge any existing state limitations period that provides for a period longer than one year.

(8) In the case of an adverse benefit determination on review with respect to a claim for disability benefits, the notification shall be provided in a culturally and linguistically appropriate manner (as described in paragraph (p) of this section).

II.  Comment on Timing of Right to Respond to New Evidence or Rationales

Claimants are frequently ambushed with new rationales or evidence during the appeal process and left with no opportunity to respond to new arguments or evidence.  Sandbagging has been a persistent problem in the ERISA appeals process and some courts have not appreciated how prejudicial this is to claimants.  In Abram v. Cargill, 395 F.3d 882, 886 (8th Cir. 2005), the court articulated the problem as follows:

[w]ithout knowing what “inconsistencies” the Plan was attempting to resolve or having access to the report the Plan relied on, Abram could not meaningfully participate in the appeals process. . . This type of “gamesmanship” is inconsistent with full and fair review.

Id.  Given that it is often very hard to supplement the record in litigation, the proposed change offers some assurance that a claimant can contribute his or her relevant evidence to the record that the court will review.  Where the claimant, as plaintiff, has the burden of proof on most issues, this only makes sense. In most litigation contexts, the party with the burden of proof is given the last word.  Here, giving the last word to the claimant during the claims appeal process is, in effect, giving claimant the right of rebuttal in litigation.

There is, however, a countervailing concern that while this extra opportunity to submit proof to the plan exists, claimants will be extending their time without benefit payments.  This is a problem that already exists and could be exacerbated. Plans have protested that giving the claimant the last word will make the internal appeals processes go on forever.  This argument is out of touch with the reality of being an ERISA disability benefits claimant.  These claimants, in my experience, would not continue the process ad nauseum while they are unable to pay their mortgages and feed their families.

The following suggestion places reasonable limits on both claimants and plan administrators and responds to the concern that claimants will have to wait too long for determinations on review. While claimants will want to make fast work of their responses because they are usually without income during this process, the type of evidence they often need to respond to new evidence or rationales by the plan may require hiring an expert such as another physician, psychologist, or vocational consultant.  These professionals are not always readily available for quick turn-arounds and, depending on the new information such experts are responding to, they may need weeks to evaluate the new information.  For this reason, claimants should have at least 60 days to respond to new evidence or rationales provided by the plan on appeal.  Moreover, the period for the decision on review to be completed should be tolled during this 60-day period.  When the claimant has responded, the plan administrator should be allowed whatever time was left under the existing regulations or 30 days, whichever is longer, to issue its determination on review.  This rule should apply whether the new information is a new “rationale” or new “evidence.”

Accordingly, I suggest the following amendment to the proposed regulation (new language indicated by bolding and underlining):

2560.503-1(h)(4)(ii) [proposed regulations]

(ii) Provide that, before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence  or rationale  considered, relied upon, or generated by the plan (or at the direction of the plan) in connection with the claim; such evidence must be provided as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided under paragraph (i) of this section to give the claimant a reasonable opportunity to respond prior to that date. Such new evidence or rationale must be provided to claimant before the decision on appeal is issued and the claimant must be afforded up to 60 days to respond. The time to render a determination on review will be suspended while the claimant responds to the new evidence or rationale.  After receiving the claimant’s response to the new evidence or rationale or notification that the claimant will not be providing any response, the plan will have whatever time was left on the original appeal resolution time period or 30 days, whichever is greater, in which to issue its final decision.

III.  Conclusion

Thank you for your consideration.  If I can provide any additional information that would be helpful, please let me know.

Sincerely,

s/ Jennifer M. Danish