Disability Claims: Have You Checked Your Benefits Plans?

Beginning April 1, 2018, new procedural rules issued by the U.S. Department of Labor (DOL) changed how plan administrators for ERISA-covered plans treated disability benefits claims. Almost eight months later, it has become clear that many benefits administrators did not understand the full reach of these new procedural rules.

While many plan administrators ensured that some plans, such as long-term disability plans, complied with the new rules, many others are impacted. For instance, if an employer maintains retirement plans, deferred compensation plans, welfare benefit plans, or other tax-favored savings plans that condition the payment of some benefit on the determination of whether a claimant is disabled, and the plan administrator has discretion in making that determination, the new procedural rules apply to those plans as well. On the other hand, if a plan simply relies on the decision making of a third-party entity, such as the Social Security Administration, and the plan administrator has no discretion over the disability determination, then the new procedural rules likely do not apply to that plan.

The new rules specified that plan administrators must ensure the following when it comes to processing and, especially, denials of disability claim benefits:

  • Disability claim notices which deny benefits under an ERISA-covered plan must be issued and include the following:
    • An explanation as to why either (a) the administrator disagreed with the opinion of a healthcare provider or vocational professional or (b) the Social Security Administration;
    • Specification of the rules, protocols, guidelines, or other criteria in the plan which resulted in the denial, or some statement that such criteria do not exist; and
    • Notice that the participant whose claim was denied is entitled to access and copies, free of charge, of any documents or other information that is relevant to the claim.
  • The participant who is making the claim must be given notice and a fair opportunity to respond to any new information that is received and is considered as part of the disability benefits claim;
  • Administrators must avoid conflicts of interest with respect to decision makers for disability claims. For example, decision makers must not be evaluated (e.g., promoted, hired, or compensated) based on the claims that they deny; and
  • More requirements on which we previously reported.

If you require assistance in determining whether your plans are subject to and meet the requirements of the procedural rules, please contact your Employers Council representative.