ERISA-covered employee benefit plans must establish and maintain reasonable procedures governing participants’ benefit claims (e.g., providing notification of initial benefit determinations and appealed benefit determinations). Under ERISA, a claimant cannot file a lawsuit against a plan until he or she has exhausted the plan’s procedures for claiming benefits. Also, if a plan does not adhere to such procedures, then the plan might receive less deference from a court reviewing a participant’s claim’s denial than if the plan had followed these procedures.
In December of 2016, the Department of Labor (“DOL”) published a final regulation that altered the claims review process for ERISA plans providing disability benefits. The regulation was scheduled to apply to claims filed on or after January 1, 2018. However, via a January 5, 2018 news release, the DOL announced a 90-day delay of the regulation’s applicability date. Therefore, the regulation will apply to disability claims filed after April 1, 2018.
As you would expect, the regulation applies to disability plans that are subject to ERISA. However, the regulation also applies to retirement plans that condition a benefit’s availability on the showing of the claimant’s disability, if the plan’s claims adjudicator must make a determination of disability in order to decide a claim. Conversely, the regulation does not apply to a retirement plan when the plan provides a benefit that is conditioned on the finding of a claimant’s disability by a party other than the plan (e.g., the Social Security Administration, or the employer’s long-term disability plan). A participant’s disabled status can arise in a retirement plan in various situations, such as when a plan provides for full vesting or special distribution rights upon a participant being deemed disabled.
The DOL states that the regulation will “give America’s workers new procedural protections when dealing with plan fiduciaries and insurance providers who deny their claims for disability benefits.” Those procedural protections include the following:
As April 2, 2018 rapidly approaches, ERISA-covered plan documents should be reviewed to see if the regulation applies. If it does, then the plan document and/or certain participant communications (e.g., the Summary Plan Description) will need to be amended by incorporating the regulation’s new requirements. Also, plan sponsors should conduct discussions with external claims adjudicators and internal benefits committees, to help ensure that the new requirements are implemented timely and properly.
Here is a link to the DOL’s news release: https://www.dol.gov/newsroom/releases/ebsa/ebsa20180105.