April 1, 2018 marked the start date for employee benefit plans to comply with a final regulation under ERISA for claims related to disability benefits or disability determinations when the employee benefit plan makes its own determination as to whether a participant is disabled.
For welfare plans, such as health care and disability plans, it seems obvious the Disability Claims Regulations would be applicable. In qualified plans, it is not immediately obvious. Many retirement plans use a disability determination to immediately vest a participant in their benefits subject to a vesting schedule or to provide a disabled participant with a discretionary contribution in the year of disability regardless of their hours worked or their employment on the last day of the plan year. So, the Disability Claims Regulations apply to qualified retirement plans also.
The purpose of the Disability Claims Regulations is to make the claims review process for disability benefit claims under all ERISA plans similar to those applicable to group health plans subject to the Affordable Care Act. The Disability Claims Regulations are likely to make the administrative cost of determining the disability of a participant more expensive and make it easier for participants to pursue their claims in court. Also, the Disability Claims Regulations will require an amendment to all plans subject to ERISA that determine the disability of a participant.
Some of the key modifications made to the disability claims procedures by the Disability Claims Regulations include the following:
Standard for Determining a Claim
The Disability Claims Regulations require that the any claims and appeals for disability determinations are made in a manner to avoid any conflicts of interest. Specifically, the plan administrator must “ensure that all claims and appeals for disability [determinations] are adjudicated in a manner designed to ensure the independence and impartiality of the person involved in making the decision,” according to the DOL. In addition, the decision to hire, fire, compensate, terminate, promote or similar decisions related to the professionals who will assist in the disability determination must not be made based on the likelihood that the individual will deny the disability determination. For instance, the plan cannot provide bonuses based on the number of denials made by a claim adjudicator, and the plan could not contact a medical expert based on such individual’s reputation for denying disability determinations.
Expanded Disclosure Requirements
The Disability Claims Regulations require additional information to be included in any notice of an adverse disability determination. The additional information required includes all of the following information:
- An explanation that a disability determination was based on medical necessity, experimental treatment, or similar exclusion or have a statement that such an explanation will be provided free of charge upon request.
- A statement that the participant has access to their entire claim file (even though “claim file” is not defined, nor what type of “access” is required) and other relevant documents and is guaranteed the right to present evidence supporting their claim during the review process.
- Provide a full discussion of all reasons related to a claim denial, including the basis for disagreeing with the views of all individuals consulted during the claims process, regardless who presented such views.
- The specific internal rules, guidelines, protocols, standards, or other similar criteria of the plan relied upon in making an adverse determination or a statement that such internal rules, guidelines, protocols, or other similar criterion of the plan do not exist.
Right to Review and Respond prior to Final Decision
If the plan anticipates denying a participant’s appeal of an adverse disability determination, in whole or in part, based on new or additional evidence or a new or additional rationale than what was used in the initial adverse determination, the plan must provide the participant with the new or additional evidence considered, relied upon, or generated by or at the direction of the plan and/or the new or additional rationale for the adverse determination. Such information must be provided free of charge and as soon as possible to provide the participant with a reasonable opportunity to review the information and submit a response before the decision is required to be rendered.
Culturally and Linguistically Appropriate Notice
The Disability Claims Regulations require that all claims notices and disclosures are written in a culturally and linguistically appropriate manner—similar to the requirements applicable to group health plans under the Affordable Care Act. This means that when a notice and/or disclosure are sent to an address in a county that uses an applicable non-english language special rules apply. An applicable non-english language is a non-English language used by ten percent or more of the population and they are literate only is such language. The special rules require to plan to provide oral language services (such as a telephone customer assistance hotline) that would answer questions in the applicable non-english language and provide assistance with filing claims and appeals in such language; provide, upon request, a notice written in such language; and include in the English versions of all notices, a written statement prominently displayed in any applicable non-english language clearly indicating how to access the language services provided by the plan.
Deemed Exhaustion of Administrative Remedies if the Claims Procedures are not Strictly Followed
The Disability Claims Regulations deem a claimant to have exhausted all administrative remedies if a plan fails to strictly adhere to all of the DOL claims regulations, so it is vital for the plan administrator or follow these requirements. There is an exception to the deemed exhaustion if the failure was de minimis, non-prejudicial, attributable to good cause or matters beyond the plan’s control, in the context of an ongoing good-faith exchange of information and not reflective of a pattern or practice of non-compliance.
Statute of Limitations
The plan is allowed to impose a limitations period for the participant to bring a civil action to adjudicate their claims, which they are statutorily permitted to do after they have exhausted their administrative remedies in the plan that has completed the initial and appeal level of the claims procedures. It is also a good idea for the plan to impose a venue restriction to prevent the participant from filing a civil action in a remote jurisdiction. If the plan imposes a limitations period, the Disability Claims Regulations require that the adverse determination notices on appeal include the description of any limitations period and the specific expiration date applicable to the participant’s claim.
The information provided above is created by Attorney Jeremiah Wood of Friday, Eldredge & Clark, LLP. Jeremiah practices in the firm’s Employee Benefits and Executive Compensation Practice Group. His practice includes experience in the design, implementation, administration and termination of tax-qualified retirement plans (including traditional pension plans, cash balance plans, profit sharing plans, 401(k) plans, and ESOPs), 403(b) plans, nonqualified deferred compensation plans (including 457(b) and 457(f) plans and deferral compensation arrangements for executives) and health and welfare plans.
This is not a substitute for legal advice and should be considered for general guidance only. For more information or if you have further questions, please contact one of our Employee Benefits Attorneys.