Alerts and Updates
Affected plans include disability benefit plans subject to ERISA and other ERISA plans that condition the payment of a benefit based upon a disability determination.
The U.S. Department of Labor has issued final regulations for the processing of disability claims under certain benefit plans governed by the Employee Retirement Income Security Act of 1974 (ERISA). The rules are effective for disability determinations filed on or after April 1, 2018.
Which Plans Are Affected?
Affected plans include disability benefit plans subject to ERISA and other ERISA plans that condition the payment of a benefit based upon a disability determination. This latter group of plans may include qualified retirement plans (such as defined benefit plans, 401(k) plans, profit sharing plans and 403(b) plans), as well as severance pay plans, nonqualified deferred compensation plans and supplemental retirement plans. Some programs that provide benefit payments upon a finding of disability may, however, be classified as payroll practices that are not subject to ERISA, and therefore not covered by these new rules.
Note that even if the particular benefit plan is subject to ERISA and provides for a disability benefit payment, the new requirements will only apply if the plan has language that gives the employer, a committee or an administrator the authority to make the disability determination that governs whether a disability payment is made from the plan. If, however, the disability determination is made by a third party such as the employer’s long-term insurance carrier or the Social Security Administration, that determination will control.
What Is Required Under the New Rules?
If the disability claim is governed by these new procedures, then several new procedures must be satisfied. These include the following:
- Claims and appeals must be determined in a manner that ensures the independence and impartiality of the person involved in making the determination.
- The disability denial notice must contain a full discussion as to why the plan has denied the benefit, what standards were applied in making the decision and the adjudicator’s basis for not following the views of the third party payers or with the disability benefits determinations of the Social Security Administration.
- Claimants must be given timely notice of their right to access their complete claim file and any other relevant documents and to review and respond to new evidence or rationales developed by the plan during appeal.
- Written notices to the claimant must be presented in a culturally and linguistically appropriate manner if a claimant’s address is in a county where 10 percent or more of the population of that county are literate only in the same non-English language. For such claimants, notices of adverse benefit determinations must include a prominent one-sentence statement about the availability of language services, and upon request, the notice must be provided in the other language.
- Any denial notice must inform the claimant of any applicable limitation periods for filing an appeal or lawsuit.
What Are the Consequences of Violating the New Rules?
If the new claims procedures are not followed, then the claimant will be deemed to have exhausted administrative remedies. As a result, the claimant would be allowed to immediately file a lawsuit to seek a review of the disability determination. The court reviewing the claim would not be required to give any deference to the prior decision of the plan as a result of the failure to follow the new claims procedures.
Employers should examine their plans and programs to identify which ones are subject to ERISA. To the extent a plan or program is subject to ERISA, disability claim determinations filed on or after April 1, 2018, are subject to the new claim procedures. The party making this determination, such as the employer or third party administrator, should be made aware of these new rules. Plan amendments to conform the claims procedures to the new rules must be adopted before the end of the plan year and made retroactive to April 1, 2018.