New Disability Claims Rule for Welfare Benefit Plans
On December 19, 2016, the U.S. Department of Labor announced a new rule updating the process for reviewing claims and appeals for disability benefits covered by ERISA. Initially, the final rule was supposed to apply to all claims filed on or after January 1, 2018. But the rule was delayed for 90 days, pushing the effective date to April 2, 2018, thereby applying to claims filed after April 1, 2018.
The final rule affects all ERISA-covered welfare benefit plans that provide disability benefits. Further, the plan must actually make disability determinations in order to be impacted. If the plan depends on a third party, such as the Social Security Administration, to make disability determinations, then the final rule does not apply.
Overview of Changes
The new rule improves the disclosure requirements for claimants of disability benefits. For instance, if your welfare plan denies a claim, the denial notice must contain a complete explanation of why the claim was denied plus the standards used to arrive at the decision.
In addition, denial notices must:
- Be written in a culturally and linguistically appropriate manner.
- Inform claimants of their right to their entire claim file and all other relevant documents, if requested.
- List the internal guidelines and rules used to deny the claim or, alternatively, provide a statement confirming that no such internal protocols were used.
Before denying an appeal, the plan administrator must give the claimant any new or additional evidence that was considered or used in connection with the claim. The claimant must receive this new information, free of charge, and within a reasonable amount of time so that he or she may respond before an appeal decision is made.
The claims and appeals processes should be carried out in an impartial manner, by individuals who do not have a conflict of interest. For instance, decisions regarding the hiring, compensation, termination or promotion of a claims adjudicator or medical expert cannot be based on the likelihood that this person will be in favor of denying a claim.
As a general rule, claimants should go through the plan's appeals process before taking the matter to court. But if the plan fails to abide by all the DOL's claims requirements, the claimant will legally have exhausted the plan's appeal process and can then file a suit in court. An exception applies if the violation was caused by a minor error, as defined by the DOL.
The final rule consists of other requirements, so be sure to coordinate with your plan administrator to ensure appropriate implementation. Also, keep in mind that your summary plan description (and plan document) will need to be updated and distributed accordingly.