In response to the disproportionate amount of benefit plan litigation related to disability benefits, the U.S. Department of Labor (DOL) amended its claims procedures governing disability benefits in order to ensure that workers receive a full and fair review of their benefit claims (Final Regulations). See 81 F.R. 92316. The Final Regulations are effective for claims and appeals made after April 1, 2018.
ERISA Covered Plans
The Final Regulations apply to any employee benefit plan that conditions benefits upon a showing of disability (regardless of the manner in which the plan characterizes the benefit). If a plan administrator (or other claims adjudicator) must make a determination of disability in order to decide a claim, including a determination of disability as a payment or vesting event, the claim must be treated as a disability claim for purposes of the Final Regulations. Accordingly, in addition to insured short-term and long-term disability plans, the Final Regulations may also apply to other employee benefit plans, including, but not limited to, qualified retirement plans, group life insurance and AD&D plans, and top-hat plans (e.g., SERPs and other non-qualified deferred compensation plans that are subject to ERISA).
Changes Under the Final Regulations
The Final Regulations are intended to ensure that claims and appeals for disability benefits are adjudicated in manner designed to provide for independence and impartiality; that benefit denial notices contain a full discussion of the reasons why the claim was denied and the standards behind the decision; that participants have access to their entire claim file and are allowed to present evidence and testimony during the review process; and that notices are written in a culturally and linguistically appropriate manner. Set forth below is a brief summary of the new obligations imposed under the Final Regulations.
Providing Additional Information
To the extent applicable, plan administrators must now provide the following additional information in connection with an adverse disability benefit determination with respect to both the initial claim and an appeal:
- An explanation of why the plan administrator disagreed with, or did not follow, the views of any professionals who treated or evaluated the claimant, regardless of whether such views were offered by the claimant or obtained by the plan;
- An explanation of why the plan administrator disagreed with any disability determination made by the Social Security Administration that the claimant presented to the plan;
- An explanation of the scientific or clinical judgment supporting the determination that applies the terms of the plan to the participant’s medical circumstances if the adverse benefit determination is based on a lack of medical necessity, experimental treatment, or other similar exclusions or limits;
- A reference to the specific internal rules, guidelines, protocols, standards or other similar criteria of the plan that the plan administrator relied upon in making the adverse determination;
- A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claimant’s claim for benefits; and
- A description of any applicable statute of limitations for filing a claim under ERISA §502, including the calendar date on which the statute of limitations expires.
Conflicts of Interest
The Final Regulations require that that disability benefit claims be adjudicated in a manner designed to ensure the independence and impartiality of the person(s) making the decision. In this regard, decisions regarding hiring, compensation, termination, promotion or similar matters with respect to any individual (such as an employee, claims adjudicator or medical expert) must not be made based upon the likelihood that the individual will support a denial of benefits.
Non-English Language Assistance
The Final Regulations are also intended to provide additional safeguards for individuals who are not fluent in English. Therefore, a notice of adverse benefit determinations must be provided in a culturally and linguistically appropriate manner in certain situations.
For example, if a claimant's address is in any United States county where 10 percent or more of the population residing in that county are literate only in the same non-English language, the notice of adverse benefit determination must include a prominent statement in the relevant non-English language about the availability of language services. In addition, the plan will be required to provide a customer assistance process (such as a telephone hotline) with oral language services in the non-English language and provide written notices in the non-English language upon request.
Based on American Community Survey data published by the United States Census Bureau, there are approximately 255 U.S. counties (78 of which are located in Puerto Rico) that currently meet the 10 percent threshold. For a complete list, click here.
Employer Action Items
In order to comply with the new requirements, employers should consider the following action items:
Inventory ERISA Employee Benefit Plans
Review and identify all company-sponsored employee benefit plans to determine if the plan condition benefits, including the payment or vesting thereof, on a determination of disability.
Amend Claims Procedures and Update Notices, Summary Plan Description and Third- Party Service Provider Agreements
For insured short-term and long-term disability plans, confirm that the insurance carrier has updated the plan and Summary Plan Description to comply with the Final Regulations.
For each other employee benefit plan affected by the new rules, update the existing claims procedures set forth in the plan and its Summary Plan Description to comply with the Final Regulations. Additionally, benefit/claim notices and third-party service provider agreements should also be reviewed to determine if any changes are required.
Finally, to the extent new SPDs will not be distributed, a summary of material modification describing these changes should be distributed to all participants (this must occur even if the plan is insured, as carriers do not typically issue such notices)
Employees involved in making disability claims determinations should be trained on the new requirements imposed under the Final Regulations. Additionally, employers should review existing policies and procedures to ensure that the independence and impartiality standards (described above) are properly adhered to and documented.