As of April 1, 2018, the U.S. Department of Labor’s (DOL) final rule on disability claims procedures became effective. This rule applies to claims for disability benefits that are filed under certain ERISA-covered plans on or after April 1, 2018, and require that plans, plan fiduciaries, and insurance providers comply with additional procedural requirements when deciding claims involving disability determinations.
Such disability determinations can impact many different types of plans, including qualified retirement plans, welfare plans and non-qualified plans such as deferred compensation plans.
As alluded to in the above paragraph, affected plans are not limited to disability plans. Any plan where a participant could be entitled to a benefit based on a determination of disability is subject to the new rule. However, plans that by design rely on a determination of disability by third parties such as the Social Security Administration (SSA) or by the insurance carrier under a separate long-term disability insurance plan are not affected by the new rule.
The final rule has procedural requirements designed to provide a full and fair claims review process for disability claims, similar to those applicable to non-grandfathered group health plans under the Affordable Care Act (ACA). The final rule also requires that adverse benefit determinations contain a discussion of the decision, including the basis for disagreeing with a disability determination made by the SSA, if applicable.
Before a final decision on appeal can be issued, the claimant must have a right to review and respond to any new or additional evidence relied upon or generated in connection with the claim. Generally, if a plan fails to comply with all ERISA-required claims processing rules, the claimant may immediately pursue his or her claim in court.
In addition, the final rule also provides that notices must be written in a culturally and linguistically appropriate manner. Finally, the final rule also contains specifics on the impartiality and independence of claims adjudicators, service providers, and vendors.
What actions should you take?
Employers should promptly identify which benefit plans are affected by the new rule so that the applicable claims procedures are included in formal plan documents, summary plan descriptions, and/or other employee communications. Plan amendments or summary of material modifications can be substituted as necessary. Benefit denial notices must also be revised to reflect the new procedures.
Employers should also review service agreements with service providers (especially if fully insured) to clarify who has responsibility for compliance with the final claim procedures and who will be liable for any failures to comply. If any service providers make and/or communicate these disability determinations for your plans(s), confirm that their procedures and related participant communications are, or will be, in compliance with the new rules. The service provider agreements should not tie financial incentives and employment decisions to claim outcomes, such as providing bonuses for denied claims.
The DOL did not change the 45-day deadline by which a plan must make a decision on an appeal request. The final rule also discusses retroactive plan rescissions. If a disability plan is retroactively rescinded, the plan’s appeals process is triggered immediately. Claimants can skip the plan’s claims procedures (including the appeal process) if the plan administrator does not follow those procedures. Given these new requirements, I recommend that employers avoid rescinding plans retroactively.
With respect to the new notices, a plan must make translation services available to certain claimants who speak languages other than English. This includes oral language services to assist with claim and appeal filing, translated notices upon request, and information to claimants about how to receive these language services. If a claimant’s address is in a county where at least 10 percent of the population is literate only in the same non-English language, denial letters must include a prominent statement in that non-English language about the availability of translation services. The plan must provide a copy of the applicable letter or notice in that language upon the claimant’s request. The DOL provides county information on its website.
See how BarFly Ventures went from fully insured to self-funded to gain more control of their employee benefits program: