The Department of Labor (DOL) has proposed a 90-day delay in the effective date of the final claims regulations for ERISA-covered plans that provide disability benefits.
The final regulations, published on December 16, 2016, amend the rules governing claims and appeals procedures for plans that provide disability benefits, such as short-term and long-term disability plans, as well as other plans that condition the availability of benefits upon the plan’s determination that the participant is disabled (e.g., 401(k) and pension plans). Under the proposal, the regulations would apply to disability claims filed after April 1, 2018, rather than the initial January 1, 2018, effective date.
The final regulations require plans, plan fiduciaries, and insurance providers to comply with certain requirements when dealing with disability benefit claimants. These requirements follow similar rules to health care reform’s enhanced requirements for group health plans. In general, the final regulations include the following:
- require more detail in benefit denial notices;
- impose additional criteria to ensure claims and appeals are adjudicated in a manner of independence and impartiality;
- allow claimants to go directly to court for review if a plan’s procedures failed to comply with the requirements;
- treat most rescissions of coverage as adverse benefit determinations; and
- require disability claims notices written in a “culturally and linguistically appropriate manner.”
After the DOL initially published the final rules, various stakeholders and lawmakers asserted that the new rules would cause an increase in litigation, impose greater administrative costs, drive up disability benefit premium rates, and ultimately impair a participant’s access to disability insurance benefits. Pursuant to Executive Order 13777, a directive by President Trump to reduce the amount and cost of regulations, the DOL concluded that it is appropriate to give the public an additional opportunity to submit comments and data concerning the potential impacts on the final regulations. Based on these responses, the DOL may allow the final regulations to take effect as written, propose further extension, amend the regulations, or withdraw the regulations entirely.
The uncertain status of these final regulations may present some administrative challenges.
As a plan sponsor, you may need to decide whether to amend your plan to comply with the final regulations as initially issued or wait and see if the DOL will issue any new guidance or further delay of the effective date of the regulations.
OneDigital will be closely monitoring any further developments and provide additional guidance as it becomes available.