March 10, 2018
Effective for disability claims filed after April 1, 2018, employee benefit plans subject to the Employee Retirement Income Security Act (ERISA) must comply with new requirements.
In 2016, the U.S. Department of Labor (DOL) released a final rule to strengthen the claims and appeals requirements for plans that provide disability benefits and are subject to ERISA. The final rule was scheduled to apply to claims that are filed on or after January 1, 2018. However, the DOL had delayed the final rule for 90 days-until April 1, 2018 to give stakeholders the opportunity to submit comments on the final rule's benefits and costs. According to the DOL, the information it received during the delay period did not justify modifying or rescinding the final rule. Thus, the final rule will take effect without change.
A benefit is considered a "disability benefit" if the claimant has to be disabled in order to obtain the benefit. It does not matter how the benefit is characterized or whether the plan as a whole is a retirement plan or a welfare plan. If the claims adjudicator must make a determination of disability in order to decide a claim, the claim must be treated as a disability claim for purposes of the DOL's claims procedures.
The final rule is intended to implement a more uniform, rigorous, and fair disability claims and appeals process that conforms to the requirements applicable to group health plans under the Affordable Care Act (ACA)'s Claims and Appeals Final Rule.
Specifically, the final rule requires that plans, plan fiduciaries and insurance providers comply with additional procedural protections when dealing with disability benefit claimants. The final rule includes the following requirements for the processing of claims and appeals for disability benefits:
Improvement to Basic Disclosure Requirements: Benefit denial notices must contain a more complete discussion of why the plan denied a claim and the standards used in making the decision.
Right to Claim File and Internal Protocols: Benefit denial notices must include a statement that the claimant is entitled to receive, upon request, the entire claim file and other relevant documents. Benefit denial notices also must include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were used in denying a claim, or a statement that none were used.
Right to Review and Respond to New Information Before Final Decision: The final rule prohibits plans from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage unless the claimant is given notice and a fair opportunity to respond.
Avoiding Conflicts of Interest: Plans must ensure that disability benefit claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the people involved in making the decision. For example, a claims adjudicator or medical or vocational expert could not be hired, promoted, terminated or compensated based on the likelihood of the person denying benefit claims.
Deemed Exhaustion of Claims and Appeal Processes: If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other specified conditions are met. If the claimant is deemed to have exhausted the administrative remedies available under the plan, the claim or appeal is deemed denied on review without the exercise of discretion by a fiduciary and the claimant may immediately pursue his or her claim in court.
Certain Coverage Rescissions Are Adverse Benefit Determinations Subject to the Claims Procedure Protections: Rescissions of coverage, including retroactive terminations due to alleged misrepresentation of fact (for example, errors in the application for coverage), must be treated as adverse benefit determinations that trigger the plan's appeals procedures. Rescissions for nonpayment of premiums are not covered by this provision.
Notices Written in a Culturally and Linguistically Appropriate Manner: Similar to the ACA standard for group health plan notices, the final rule requires that benefit denial notices be provided in a culturally and linguistically appropriate manner in certain situations.
Statute of Limitations: Plans must provide claimants with a description of any contractual limitations period that applies, and the expiration date relevant to the claim being adjudicated.
The final rule applies to ERISA plans that include disability benefits. These plans must comply with the new procedural protections, effective for claims that are submitted after April 1, 2018. Entities that administer disability benefit claims, including issuers and third-party administrators, will need to revise their claims procedures to comply with the final rule. This includes sponsors of defined benefit pension plans, 401(k) plans, 403(b) plans covered by ERISA, and top hat plans, in addition to disability benefit plans.
Specific employer action items include the following:
The DOL's final rule is available here.
For additional information, please contact your Burnham Benefits Consultant or Burnham Benefits at 949-833-2983 or firstname.lastname@example.org.
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