New Disability Claims Procedures Impact a Broad Range of Employee Benefit Plans

The Department of Labor announced earlier this month that regulations on claims and appeals for employer-provided disability benefits will go into effect on April 1, 2018.  The announcement comes following a delay in the original January 1, 2018 effective date to allow for an extended comment period. The new regulations do not merely apply to disability benefit plans.  Any welfare, retirement, or executive compensation plan that conditions a benefit on a finding of disability may be subject to the new regulations.

The regulations give workers new procedural protections when dealing with plan fiduciaries and insurance providers who deny their claims for disability benefits.  

Claims Subject to the Disability Procedures

The disability claims procedures apply to any ERISA plan benefit (i) that is conditioned on the claimant being disabled, and (ii) where the claims administrator must determine whether the claimant is disabled.  A plan that conditions a benefit on a claimant being determined to be disabled under another plan or by a third party, such as the Social Security Administration, is not subject to the disability claims procedures.  However, if the plan requires its own disability determination, the disability claims procedures apply.  The disability claims procedures may apply to ERISA welfare benefit plans and pension benefit plans.

New Claims Procedure Requirements

New requirements include the following:

• Claims and appeals for disability benefits must be adjudicated in a manner that insures the independence and impartiality of the decision-maker.  Decisions such as hiring, promotion, compensation, and termination must not be made based on the likelihood that the individual will support a claims denial.
• Benefit determinations must be made in a linguistically appropriate manner.
• The claimant must be notified of any contractual limitations period that applies to the claimant’s right to bring an action under ERISA.
• The claimant must be informed of his or her right to receive copies of all documents and records relevant to the claim.
• The plan must provide a discussion of an adverse decision, including the reason for not following a Social Security Administration disability determination and/or the views of health care and vocational professionals.
• A rescission of disability coverage must be treated as an “adverse benefit determination” subject to the claims procedures.
• The claimant must be provided a copy of any specific internal rule, guideline, protocol, standard or other criteria relied upon in making an adverse benefit determination.

Next Steps

Employers should determine whether any of their employee benefit plans are subject to the new disability claims procedures.  Retirement and executive compensation plans, in addition to short-term and long-term disability plans, may be required to comply with the new rules.  Plan documents and summary plan descriptions for plans subject to the claims procedures should be reviewed and amended as necessary to comply with the new rules by April 1, 2018.