DOL recently announced that it will review ERISA’s disability claims procedures regulations for questions of law and policy to determine if they should be amended, delayed, or withdrawn. The regulations, which were finalized in December 2016 and slated to take effect for claims made on or after January 1, 2018, require covered plans to satisfy additional procedural and notice requirements for disability claims.
Background. ERISA requires covered plans to maintain an internal review and appeals procedure for the settlement of claims for benefits. Typically, if a plan contains these procedures, a court will be deferential to the claim determination made by the plan administrator. When a plan does not contain such claims procedures, courts may review a claims decision without providing any deference to the plan administrator’s determination.
ERISA’s disability claims procedure regulations apply to health and welfare plans and retirement plans that: (i) condition the award of benefits on a finding of disability; and (ii) require the employer to make the disability determination. However, the regulations do not apply to any plan that provides a benefit conditioned on the finding of disability made by a third party other than the plan.
Final Regulations. The final regulations added the following procedural requirements to the disability benefit claims process:
- Rescissions of Coverage Procedures. Plan administrators must treat certain rescissions of coverage as adverse benefit determinations.
- Benefit Denial Notices. Benefit denial notices must provide a more detailed description of the reason for the claim denial and be written in a linguistically and culturally appropriate manner.
- Explanation of Claims Procedures. Plan administrators must explain the protocols that were used to determine the participant’s benefit claim.
- Access to Claims File. Plan administrators must inform participants, in benefit denial notices, that they are entitled to access, free of charge, all documents relevant to the adverse claim determination.
- Access to New Evidence. Plan administrators must provide participants with any new evidence being considered by the plan during the appeal process.
- Conflicts of Interest. Plan administrators must make benefit determinations in a manner that ensures independence and impartiality of the decision-makers involved in the process.
For more information on these requirements, see the Alert of 12/22/2016.
Takeaway for Employers. An announcement of this nature is fairly uncommon so it is likely, but not a certainty, that DOL will delay and/or amend the final regulations. In the wake of DOL’s announcement, employers that sponsor plans covered by the regulations must choose between the following two options:
- Proceed with amending their plans to implement the new requirements or provide that the determination of disability be made by a third party (thereby exempting the plan from the regulations).
- Wait to implement any changes until the future of the regulations becomes clearer.
The final regulations are available for review at: https://www.gpo.gov/fdsys/pkg/FR-2016-12-19/pdf/2016-30070.pdf