Finalized Disability Claims Procedures
On July 19, 2017, the U.S. Department of Labor (DOL) updated their regulatory agenda to include a review of the final regulations originally set to take effect on January 1, 2018 for disability claims made on or after that date from disability plans. These final regulations change the procedural requirements to protect and safeguard claims for disability under both group health plans and retirement plans.
We reported earlier that due to the potential impact on these employer plans, the DOL announced it was re-reviewing the policy and would entertain proposed changes and tentatively delay the start of the final regulations to April 1, 2018. This date has been officially announced as the effective date of the DOL’s final regulations without further change to the original regulations which can be found at https://www.gpo.gov/fdsys/pkg/FR-2016-12-19/pdf/2016-30070.pdf.
What this change means
ERISA requires covered plans to maintain an internal review and appeals procedure for the settlement of claims for benefits. However, the regulations do not apply to any plan that provides a benefit conditioned on the finding of disability made by a third-party other than the plan (i.e., the employer’s long-term disability plan or the Social Security Administration). Determinations must be impartial by any third-party claims adjudicator or vocational expert who cannot be hired, promoted, terminated, or compensated based on the likelihood of denying claims.
The new rules ensure that disability claimants receive a clear explanation of why their claim was denied and their rights to appeal a denial. Under these final regulations, benefit denial notices must be updated to include a plan’s internal rules and criteria used to adjudicate claims (including a statement if none was used).
Employers should discuss any impact to their plan caused by this Amendment with their financial advisor, attorney, or plan administrator.
Document Agility, Inc. has amended its Prototype and Volume Submitter Plans to reflect the DOL’s final regulations. Copies can be found under the RESOURCES heading on our website along with updated administrative claims policies. The 403(b) Volume Submitter Plan is not affected because it included the DOL language when it was approved.
For non-governmental tax-exempt organizations using our 457(b) Plan, an amendment is available. Although the ESOP and KSOP plan documents were not directly affected, we have made a sample Claims Procedure Amendment available as a guide for adopting employers to discuss with counsel.
A Summary of Material Modifications (SMM) for each plan type can also be found at RESOURCES. Affected employers may use this as a communication to employees.
What you need to do
Please provide a copy of the signed Amendment to each of your adopting employers along with the Claims Procedure and SMM. The Amendment along with Claims Procedure should be retained in their files. The SMM should be distributed to each of their employees as soon as administratively possible.
Summary Plan Descriptions (SPDs) will be updated after April 1, 2018 so that newly generated SPDs will contain the proper rules and procedures.
If you have any questions, please do not hesitate to contact us.