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March 26, 2018
The Department of Labor (DOL) has recently confirmed that final disability claims procedures regulations originally issued December 19, 2016 will take effect April 1, 2018. The rules will apply to disability related claims filed on or after that date. These regulations impose standards similar to what already applies for health plan claims rules (developed under the ACA) to any ERISA benefit determinations based on a participant’s disability status. As such, they have potentially broad application to various ERISA plans. This Compliance Alert focuses on employer sponsored disability plans.
There have been claims and appeals rules for disability plans subject to ERISA for many years. These new regulations are an attempt to increase transparency of the review process; prevent conflicts of interest with respect to claims reviews and denials; and align the disability claims process with the process that already applies to claims for group health benefits.
The effective date of the regulations was originally January 1, 2017, but the applicability date was delayed until January 1, 2018. In November of 2017, in response to President Trump’s Executive Order 13777, the DOL delayed the applicability date until April 1, 2018. In early January of 2018, the DOL issued a statement indicating that the comments provided by stakeholders “did not establish that the regulations impose unnecessary burdens or significantly impair workers’ access to disability benefits.” The statement confirmed that the applicability date would remain April 1, 2018, and that the agency would not further delay nor change the regulations.
The regulations apply only to disability plans subject to ERISA. Most long-term disability (LTD) plans are subject to ERISA (assuming the employer who sponsors the plan is subject to ERISA). Many employers also offer short-term disability (STD) programs. Many STD plans satisfy the conditions of the DOL payroll practice exemption (DOL Reg. §2510.3-1(b)(2)). These STD programs would not be an ERISA disability plan and are not subject to the claims and appeals regulations. Note that if an STD plan is insured, it is subject to ERISA and these new regulations.
Employers generally rely on their insurance carrier or third-party administrator (TPA) to handle the claims appeal review process for disability coverage offered to employees. This will not change with the implementation of these new rules. The first thing the employer should do is to confirm with existing carriers, and administrators, that they are prepared to implement the procedures necessary to comply with these new rules. Employers should also confirm that the carrier or TPA will be sending any appeal notifications required by the new rules to affected participants.
Employers should also consider the following:
Note again that most employers rely on their disability insurance carrier or their TPA to manage most of the claims and appeal process, including the notices that must be sent to participants. However, the employer is ultimately responsible for the plans it sponsors, so it is imperative that employers work with carriers and TPA to understand their deliverables and to know when the employer may have some involvement in the claims appeals process. We have included a detailed summary of the new rules in Attachment 1.
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.