Disability Determinations: New Enhanced Rules Are Coming (article)
Currently, ERISA plans must comply with specific claims and appeal rules. Plans that make disability determinations will soon be subject to additional enhanced standards in order to comply with final rules released by the DOL’s Employee Benefits Security Administration (EBSA) on December 19, 2016. These new rules, which become applicable to all claims for disability benefits filed on or after January 1, 2018, apply to any ERISA plan that makes a disability determination. Not only will these rules apply to short and long term disability plans, but also to retirement plans if the retirement plan makes a disability determination. Some retirement plans rely on other entities such as the Social Security Administration, or a disability plan that makes a disability determination; in which case, such retirement plans need not comply with these enhanced rules. It is important to remember, however, that while all plans subject to ERISA must comply with claims and appeal rules, they would be exempt from these enhanced standards applicable to disability plans.
Following are salient points of the final rules:
- Claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the benefit determination.
- Benefit denial notices must contain a complete discussion of why the plan denied the claim and the standards applied in reaching the decision, including the basis for disagreeing with the views of health care professionals, vocational professionals, or with disability benefit determinations by the Social Security Administration.
- Claimants must be given timely notice of their right to access to their entire claim file and other relevant documents, and be guaranteed the right to present evidence and testimony in support of their claim during the review process.
- Claimants must be given notice and a fair opportunity to respond before denials at the appeals stage are based on new or additional evidence or rationales.
- Plans cannot prohibit a claimant from seeking court review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan failed to comply with the claims procedure requirements, unless the violation was the result of a minor error. The denial letter must also explain any plan imposed time limit for filing a lawsuit, as well as the date that any limitation period expires.
- Certain rescissions of coverage are to be treated as adverse benefit determinations triggering the plan's appeals procedures.
- Required notices and disclosures issued under the claims procedure regulation must be written in a culturally and linguistically appropriate manner. This means that individuals residing in a particular county where 10% or more of its population are literate in a non-English language must be provided relevant communications in the appropriate non-English language. In addition, the plan would be required to provide a customer assistance process, such as a telephone hotline, with oral language services available in the non-English language.
Employers sponsoring disability plans should begin working with their insurers and/or third party administrators to ensure compliance with these rules.
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.